The Reserve Bank of India has cut policy rates by 125bp so far this year, but there are a number of reasons to think that it will keep the repo rate on hold not just at next week’s policy meeting but throughout 2016. In particular, the RBI faces a tough challenge meeting its medium-term inflation target, which is now its main focus. The recent recommendation of large pay increases for public sector workers, if implemented, may also incline the RBI to adopt a less accommodative stance.
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