It is useful to assess the latest monetary policy announcement in terms of the questions raised by the global and domestic macroeconomic backdrop—and the way the RBI chose to answer them.First, the intensifying tariff war launched by the US poses the risk of stagflation, with slowing global growth and inflation going hand in hand. This leaves central banks with the task of choosing which battle to fight more ferociously—the one on income deceleration or the one on potentially spiralling inflation.
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