RBI may hike key rates

RBI may hike key rates

As the overall inflation hovers around 10 per cent, economists expect the RBI to increase policy rates. “I have suggested to the RBI to take whatever measures needed to keep prices down,” Mukherjee said on Saturday, addressing the annual general meeting of the Calcutta Chamber of Commerce.

Experts said the RBI may further tighten policy rates to tackle inflation, especially food prices, with strong July industrial production numbers providing confidence that growth won’t be impacted by the move.

 While some analysts feel the RBI’s hardening of its lending and borrowing rates could be expected on that day, others believe it would wait a while before hiking policy rates. Moody’s said it expected 25-basis points increase in short term rates. “July’s stronger-than-expected industrial production results suggest little need for reluctance from the RBI at the mid-quarter meeting,” Moody’s Analytics Senior Economist, Matt Robinson, said. The RBI has already hiked short-term lending (repo) and borrowing (reverse repo) rates thrice this fiscal. While the repo rate currently is 5.75 basis points, reverse repo is 4.50 basis points.
Industrial growth figures for July exceeded expectations by accelerating to 13.8 per cent, from 7.2 per cent in the same months a year ago.

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