The surge in December wholesale prices, published today, means that it is now a near-certainty that India will tighten monetary policy later this month. A hike in the cash reserve requirement already looked a done-deal at the 29th January Reserve Bank (RBI) monetary policy meeting, and we have long expected the key policy rates would be lifted too. We forecast that both the reverse repo rate and the repo rate will climb 200bp during the course of 2010.
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