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      Question

      The MPC's June 2026 resolution notes that core CPI

      excluding precious metals stood at 2.1–2.2%. What does this specifically indicate about the nature of inflationary pressure at that time?
      A The economy was in a deflation spiral and all price categories were declining Correct Answer Incorrect Answer
      B Inflationary pressure was a broad demand-driven phenomenon spread across all sectors Correct Answer Incorrect Answer
      C Inflationary pressure was primarily supply-side and externally driven, with underlying demand-side pressures relatively contained Correct Answer Incorrect Answer
      D Gold and precious metal prices had declined sharply, creating a temporary deflationary offset Correct Answer Incorrect Answer
      E India's core inflation was driven entirely by imported inflation through the exchange rate channel Correct Answer Incorrect Answer

      Solution

      The MPC noted that 'Excluding precious metals, core inflation remained much lower at 2.1–2.2%', and 'This indicates that the input cost pressures... have not yet fully manifested in CPI' and 'demand pressures remain contained'. This low core-ex-precious-metals inflation confirms that the inflationary pressure was primarily external and supply-side (elevated global energy and commodity prices from the West Asia conflict), rather than domestic demand-driven. Broad demand-driven inflation would typically show up as elevated core inflation even after excluding volatile items which was not the case here.

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