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2013-12-18

RBI may raise repo rate to tame inflation

Reserve Bank of India (RBI) Governor Raghuram Rajan may hike the key policy interest rate by at least 0.25 per cent in the mid-quarter review of the monetary policy to tame high inflation levels, economic analysts said.

Reserve Bank of India (RBI) Governor Raghuram Rajan may hike the key policy interest rate by at least 0.25 per cent in the mid-quarter review of the monetary policy to tame high inflation levels, economic analysts said.


Senior economist at Dun & Bradstreet India Arun Singh said, "We are expecting 25 basis points hike in repo rate by the RBI and the subsequent adjustments in MSF (marginal standing facility) rate.”


The RBI is scheduled to about to announce its mid-quarter review of the monetary policy for 2013-14, in which it will decide on the repo and reverse repo rates which are key policy instruments which determine lending and borrowing rates by the commercial banks.



The central bank is also expected to hike the reverse repo rate by an equal measure to maintain a 100-basis points, or one per cent gap between the two rates, which has long been the default setting.



Singh's views were corroborated by Dipen Shah, Head, private client group research, Kotak Securities, who said that a 25 basis points hike was on the cards to contain the inflationary pressure.



"We expect the RBI to raise 25 basis points in the key lending rates. This will be done largely because of inflation levels."

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