Pausing on rate cuts

The Reserve Bank of India’s (RBI) decision not to cut any of its policy rates, despite wholesale inflation falling to a 43-month low, was only to be expected. From its perspective, there are two major sources of potential inflationary pressure that require close monitoring at this stage. The first is, of course, the rupee that has taken a hit from a sudden drying up of capital flows on top of an already high current account deficit in the country’s external transactions.

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