Read the passage carefully and answer the items based on it.
The RBI expects inflation at 6.7 percent in 2022 - 23. Recent government data also suggests that inflation has become more broad-based. Excluding the volatile components such as food and fuel, core retail inflation was around 7 percent in April with almost all subgroups in the index witnessing elevated inflation. And considering the inflation in the pipeline — the wholesale price index continues to be in double digits — price pressures are unlikely to dissipate in the immediate term. According to analysts, while manufacturing firms have been passing on the rise in input costs, it remains incomplete in the case of the services sector. However, as demand firms up, the pass through is likely to gather traction. This combination of factors suggests that inflation may not fall dramatically as and when commodity prices fall - prices may prove to be a tad sticky on the downside. The RBI's revised quarterly forecasts for inflation also seem to suggest so — inflation has now been projected at 7.5 percent in the first quarter, and 7.4 percent in the second quarter, trending downwards thereafter to 6.2 percent in the third quarter, and 5.8 percent in the fourth quarter.
Implicit in these quarterly inflation forecasts is also the acknowledgment that inflation will likely exceed the upper threshold of the central bank's inflation targeting framework for three consecutive quarters. Considering the risks that the ‘unanchoring' of inflation and inflation expectations pose to macroeconomic stability, and the country's growth prospects, the central bank must look beyond its quotidian responsibilities and continue to focus on maintaining price stability, attaching primacy to inflation management.
Why are prices unlikely to abate in the short term ?
- ABecause of inflation in the pipeline
- BBecause prices once up never come back down
- CBecause international price situation is volatile
- DBecause of pressure from subgroups
Explanation
The passage says the rate hike "is expected to make borrowing more expensive, which could dampen economic growth". Option A restates this: higher borrowing costs slow growth. Option B wrongly says growth will accelerate, option C wrongly claims borrowing becomes cheaper, and option D wrongly claims inflation rises as a result. Hence option A.