Rising inflation may prompt RBI to up rates

Rising inflation may prompt RBI to up rates

Strong showing by the industry in September has already added fuel to the debate for withdrawing fiscal stimulus.

Inflation was 0.5 per cent in September, according to data from the government, which has switched to the monthly mode for measuring rise in wholesale prices. With it expecting inflation to touch 6.5 per cent by the end of this fiscal, analysts believe RBI might go full steam on ending its easy monetary policy.

“I expect Cash Reserve Ratio) hike by 25 basis points in January policy. There could be some action on policy rates,” said HDFC Bank Economist Jyotinder Kaur. With industrial production up by 9.1 per cent in September, after close to 11 per cent expansion in August, RBI might not have to think twice, analysts said.

The central bank had already announced the first phase of the ‘exit’ from its easy money policy when it reviewed its monetary stance in October.

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