.... As monetary policy transmission has a lagged impact on inflation, central banks tend to be forward-looking and factor in the expected changes in core inflation, rather than respond to temporary cost-push pressures. Keeping this in mind, RBI has hinted at a further loosening of monetary policy, perhaps a rate cut in early 2013. Nonetheless, while core inflation could moderate in the coming months, high food and fuel inflation will keep WPI inflation well above RBI’s stated tolerance limit of 4.5-5% for the foreseeable future. This will still make it difficult for RBI to communicate the rationale behind a repo rate cut, as and when it is done......
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