With the upward spiraling of inflation, it is anticipated that the RBIwill increase its main policy rates next months, according to chief economists.
The central bank is expected to hike the repo and reverse repo rates by 0.25-0.5% at the next yearly monetary policy next month, they maintain.
Main economist Dharmakriti Joshi of Crisil said, “The high inflation surely calls for a rate hike, even if it is food-driven. The RBI is likely to act by hiking the repo and reverse repo rates by at least 0.25 per cent at its April policy”.
The WPI-linked inflation, is already at 10%, and is expected to remain in double-digits till June and can reduce after that, Joshi said.
Withdrawing its earlier easy money policy, RBI had increased the CRR by 0.75% in its 3rd quarter policy review held on 29th January but had not touched the main rates.
Bank of Baroda’s main economist Rupa Rege Nitsure said the headline inflation is expected to reach 11% in March and will be in double-digits till May-June. She said that she anticipates both the repo and reverse repo rates to go up by 0.5%, since this action is needed in light of high inflation.
If this happens, it is likely that interest rates on personal loans will go up.