With inflation affecting even non-food items, the Reserve Bank is expected to tighten its monetary policy further in its next annual policy, which can increase interest rates, Citigroup said.
A Citigroup Global Markets report said, “With inflation getting a bit more generalised, we expect the RBI to raise rates once again in its policy on April 20 with a minimum additional 100 bps (one per cent) this year”.
The anticipated RBI measure will pressure interest rates to go up.
The report said further, “We expect (interest) rate structure to remain high”.
The Reserve Bank had recently hiked the repo and the reverse-repo (short-term lending and borrowing) rates by 25 basis points to 5% and 3.5%, respectively, to stem inflation.
Bankers had said they will delay for RBI’s annual fiscal policy before deciding on increasing interest rates.
While food inflation has been curb, it is extending to non-food items. As such, general inflation rate rose to 9.89% in February and is anticipated to traverse the double-digit mark next month.
Food inflation, which was about 20% in December, has reduced to about 16-17%.
RBI had previously estimated inflation to be 8.5% by end of the current financial year.