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India’s central bank becoming hamstrung by macro risks

The Reserve Bank of India stuck to the script and eased monetary policy today. Looking ahead, the market consensus is for another 25bp cut before year-end. However, we expect a long policy hold. While concerns about the economic slowdown are not about to go away, the central bank has begun placing increasing weight on fears that still-high headline inflation is raising risks of broader macroeconomic instability.

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