RBI's dilemma intensifies

............If there is a reversal in the recent downward trend in both headline and core inflation, it will almost certainly stay the RBI's hand on July 30. In fact, unless RBI Governor D Subbarao's successor decides to follow a completely different tack for monetary policy, it is looking increasingly likely that the interest rate reduction cycle that began in April 2012 and reduced the repo rate by a cumulative 125 basis points has ended. In which case, the fundamental question has to be raised: where is the trigger for a recovery going to come from?............

The reviewer is an economic consultant, former officer-in-charge, Department of Economic Analysis and Policy (RBI), and was advisor to the National Bank of the Kyrgyz Republic and the Bank of Sierra Leone
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