The Reserve Bank of India’s (RBI) decision to raise its repo rate by 25bp to 7.5% from today was widely expected following the further rise in inflation in May. We now expect inflation to peak at close to 11% in Q3 before falling, more gradually than the RBI hopes, towards the end of the year. In this environment, we still expect two more rate hikes, to a peak of 8.0%, in the coming months.
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