....There are two factors keeping yields high. Until Rajan took over, market participants and analysts always looked at WPI inflation to predict RBI’s monetary policy move. Earlier, the comfort zone for the RBI was headline WPI inflation of 4-5 per cent. Markets are now adjusting themselves to the new target variable — CPI inflation — and this has led to the upward bias in rates. “It may be recalled that the former RBI Governor D Subbarao cut rates even when CPI inflation was close to 10.5 per cent. Now when CPI has come down by 150 basis points, we are hiking rates. This shift .........
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