RBI likely to hike policy rates this week to curb inflation
As the overall inflation is still hovering around 10 per cent, economists also expect the RBI to increase the policy rates to tame price rise.
By PTI |
NEW DELHI: The Reserve Bank may further hike its key policy rates during the monetary review on September 16, going by the suggestion of Finance Minister Pranab Mukherjee to the central bank to take more steps to check rising prices.
As the overall inflation is still hovering around 10 per cent, economists also expect the RBI to increase the policy rates to tame price rise.
"I am worried...I have suggested to the RBI to take whatever monetary measures needed to keep prices down," Mukherjee had said yesterday while addressing the AGM of the Calcutta Chamber of Commerce.
RBI's first mid-quarter policy review is scheduled for September 16.
Experts said it may further tighten its policy rates to tackle rising inflation, specially food prices, with strong July industrial production numbers providing confidence that the growth won't be impacted by the move.
While some analysts are of the opinion that the Reserve Bank'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 expects 25 basis points increase in short term rates by RBI this week.
"July's much-stronger-than-expected industrial production results suggest little need for reluctance from the central bank at next week's mid-quarter monetary policy meeting," Moody's Analytics senior economist Matt Robinson said.
He said the pressing issue of negative real interest rates and stubborn non-food inflation needs to be addressed sooner rather than later, with Moody's Analytics anticipating a 25 basis points increase to be delivered on September 16.
The RBI has already hiked short-term lending (repo) and borrowing (reverse repo) rates thrice this fiscal, including twice in July. 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. Manufacturing grew by 15 per cent in July against 7.4 per cent a year ago.
However, for the first four months of this fiscal (April-July), industrial growth is at 11.4 per cent.
Meanwhile, overall inflation for the month of July was 9.97 per cent, and figures for August are expected next week. Food inflation, on the other hand, shot up to 11.47 per cent for the week ended August 28, from 10.86 per cent in the previous week.
As the overall inflation is still hovering around 10 per cent, economists also expect the RBI to increase the policy rates to tame price rise.
"I am worried...I have suggested to the RBI to take whatever monetary measures needed to keep prices down," Mukherjee had said yesterday while addressing the AGM of the Calcutta Chamber of Commerce.
RBI's first mid-quarter policy review is scheduled for September 16.
Experts said it may further tighten its policy rates to tackle rising inflation, specially food prices, with strong July industrial production numbers providing confidence that the growth won't be impacted by the move.
While some analysts are of the opinion that the Reserve Bank'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.
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Moody's said it expects 25 basis points increase in short term rates by RBI this week.
"July's much-stronger-than-expected industrial production results suggest little need for reluctance from the central bank at next week's mid-quarter monetary policy meeting," Moody's Analytics senior economist Matt Robinson said.
He said the pressing issue of negative real interest rates and stubborn non-food inflation needs to be addressed sooner rather than later, with Moody's Analytics anticipating a 25 basis points increase to be delivered on September 16.
The RBI has already hiked short-term lending (repo) and borrowing (reverse repo) rates thrice this fiscal, including twice in July. While the repo rate currently is 5.75 basis points, reverse repo is 4.50 basis points
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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. Manufacturing grew by 15 per cent in July against 7.4 per cent a year ago.
However, for the first four months of this fiscal (April-July), industrial growth is at 11.4 per cent.
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Meanwhile, overall inflation for the month of July was 9.97 per cent, and figures for August are expected next week. Food inflation, on the other hand, shot up to 11.47 per cent for the week ended August 28, from 10.86 per cent in the previous week.
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