Global central banks continue to tighten rates amid emerging cracks in the financial system as inflation remains far above desired levels. Against this backdrop, economic activity in India has held up reasonably well in both absolute terms and relative to other large economies, owing to resilient domestic demand. Yet the outlook is becoming more uncertain due to a mix of domestic and international factors. Given that inflation, and more importantly core inflation remained above the RBI’s tolerance level of 6% in February, we believe that another rate hike is likely in April.
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