India’s Reserve Bank (RBI) kept its repo rate unchanged today at 6.25%, as was widely expected. Nevertheless, the monetary policy tightening is not over. The upswing will stay strong in coming quarters, concerns over asset bubbles will continue to grow, while non-food inflation pressures will probably stay acute. Accordingly, we forecast that the repo rate will be lifted 25bp at the next policy review in late January and will be increased by 75bp during 2011 as a whole.
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