............What, however, surprised analysts was the post-policy interaction with the Governor. To a question on whether RBI would raise the policy rate any further, given the higher, end-of-the-year CPI inflation forecast, the Governor replied the central bank was done with its policy rate hikes, which had factored in this projection; he further clarified RBI would now observe inflation as it unfolded going forward and would only act if the out-turn was significantly different than predicted. Though taken aback by the Governor’s clarifications—these didn’t quite match up to his perceived image of an inflation fighter—the implications didn’t take very long to sink in. The Governor’s explanation had completely broken the perceived link between the policy rate and headline CPI inflation............
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