Global economic activity continues to moderate amid persistently high inflation globally and the corresponding broad-based monetary policy tightening, China’s ongoing COVID Zero policy, and spillover from the Russia-Ukraine conflict. The elevated level of inflation along with a resilient labour market suggests that the generalized trend of monetary tightening is far from over. However, the pace of rate hikes is likely to slow. Meanwhile, domestic demand continues to recover, boosted by festive season sales, services sector recovery, and the government’s push on capital spending even though the external sector was a drag. With domestic headline inflation beginning to show signs of easing, and expectation of further moderation in inflation print, we expect the RBI to opt for a softer rate hike in December. As such, we retain our view of the terminal rate being at 6.5% by end of FY23.