RBI may again raise repo rate by 25 bps by July: Economists

RBI may again raise repo rate by 25 bps by July: Economists
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First Published: Sun, Jun 15 2008. 04 31 PM IST
Updated: Sun, Jun 15 2008. 04 31 PM IST
PTI
New Delhi/Mumbai: The Reserve Bank may have to raise short-term lending rate by another 25 basis points in near future with inflation expected to reach the double digit mark in the weeks ahead.
Despite the host of measures taken by the government and RBI, inflation has touched the seven-year high of 8.75% and is likely to go up further next week after the index captures the impact of fuel price hike announced on 5 June.
“Rising inflation rate may force the RBI to raise repo rate (short-term lending rate) by at least 25 basis points before the July policy announcement,” HDFC Bank chief economist Abheek Barua told PTI.
With the impact of fuel prices hike getting reflected in the inflation data, the rate could rise to a 13-year high of 10%, felt Lehman Brothers economist Sonal Varma.
“We expect another 25 basis points hike in the repo rate in quarter three of 2008 and one percentage increase in cash reserve ratio during this financial year,” she said.
RBI has, after a gap on more than a year, increase the repo rate to 8% from 7.75% to contain inflation by curbing demand.
Even according to government estimates, inflation may peak at 9.70% in October before petering out.
Inflation, which has already crossed 8.7% for the week ended May 31, may touch 9.5% in June, following the government decision to raise prices of petrol, diesel and cooking gas, official sources said.
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First Published: Sun, Jun 15 2008. 04 31 PM IST