RBI hints at key policy rate hike tomorrow

"... containing inflation will have to be the predominant objective of monetary policy in the near term," the Reserve Bank said in its macroeconomic review released a day before the third quarterly review of the policy.

The review further said that upside risks of inflation have increased and it could endanger the growth objective and also amplify risks to inclusive growth.

The economy grew by 8.9 per cent in the first half of the current fiscal, but inflation remained at a high level of 8.43 per cent in December, led by high food prices.
The food inflation for week ended January 15 was 15.52 per cent after touching a high of 18.32 on December 25, 2010.

The central bank raised key short-term lending (repo) and borrowing (reverse repo) rates for six times in 2010 to tame inflation.

The quarterly monetary policy, to be released tomorrow, is expected to balance the need for containing inflation and promoting growth.

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