The Reserve Bank of India has surprised no one by holding the repo rate at 5.50%, yet the message behind Wednesday’s monetary policy statement was anything but neutral. Inflation has collapsed to a six-year low of 2.1% on the back of food deflation, but policymakers are signalling that the easing cycle is over.In shifting the spotlight to core inflation, which has crept up to 4.4%, and projecting headline inflation climbing to nearly 5% a year ahead, the central bank may have effectively closed the door on further cuts for now. It could have benefited from keeping its powder dry and preserving flexibility for more easing, should growth falter.
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