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Higher levels of Inflation is mainly due supply-side constraints, once it gets addressed, there must not be a problem, said State Bank of India (SBI) chief Dinesh Khara at 14th mint Annual Banking Conclave

"To that extent I see inflation as transitory and the current situation is on account of fear psychosis," Khara said.

Khara further added that the demand is not yet peaked and there is still a lot of scope on that front and if the supply side concerns ease, the situation will stabilise.

Retail inflation quickened to a three-month high in November, but remained within the central bank’s target band, giving it room to keep policy rates at a record low for longer to stimulate the economy.

The Consumer Price Index (CPI) accelerated to 4.91% last month from 4.48% in October as food prices rose, offsetting the effect of a cut in fuel taxes. 

In the bi-monthly monetary policy last week, the central bank’s rate-setting panel opted to keep policy rates unchanged to strengthen economic recovery amid threats to growth from the Omicron strain of the coronavirus. However, the panel will reassess the policy again in February. In the December meeting, RBI retained the retail inflation forecast for the fiscal year at 5.3%.

RBI expects inflation to peak in the fourth quarter of this fiscal and soften after that as base effects turn adverse.

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