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The hike in repo and reverse repo rates by 25 basis points each is in line with expectations, given that rising inflation related to non-food manufactured products stems from both domestic demand-side pressures and the pass-through of increases in the global prices of fuel and other commodities to domestic prices. In the event that inflation becomes more generalised and persists at elevated levels, with sustained pressure from oil and commodity prices, the RBI may hike rates further over the next few months.
(The author is MD, ICRA Ltd.)
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