RBI may hike rates by 25 bps on Tuesday: RBS

The Reserve Bank of India is likely to go in for another round of rate hike of 25 basis points (bps) when it meets on Tuesday, and then will pause till March, according to a poll by the British lender RBS.

The 10th edition of RBS Clients' Survey, which is the third this fiscal, covered 103 local market participants, including corporates, banks, insurers and mutual funds among others.

"...An overwhelming majority of 67% are sure of a 25 bps hike in the repo rate, and then the RBI pause till March," said RBS India Managing Director & Head, Markets, Ramit Bhasin.

However, 30% of the polled expected the central bank to pause this time around. None expected any change in cash reserve ratio, which is pegged at 6% for almost two years now.

Reserve Bank Governor Duvvuri Subbarao will unveil the second quarter monetary policy on October 25; it is widely expected that he will go for yet another round of tightening.

The central bank has increased its key short-term policy rates a record 12 times since March 2010 to contain runaway inflation that has remained at elevated levels despite the government's discomfort. Core inflation stood at 9.72% in September.

Interestingly, a majority of the industry believes that the country is near the end of the tightening cycle. They also expect the repo rates to be stable at 8.5% in December and March.

On the strength of rupee, majority of those surveyed believed the local unit was likely to trade over 50 against the dollar in the near term, given the weak fundamentals of the economy.

Source: Business Standard