RBI may raise rates by 25 bps next month, says Goldman Sachs
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Another rate hike likely: Goldman

The central bank is scheduled to meet for its mid-quarterly review of monetary policy on March 17. RBI has raised rates seven times since March 2010 to fight inflation.

 PTI   
  • New Delhi,  February 15, 2011  
  • |  
  • UPDATED   14:51 IST

Global financial firm Goldman Sachs on Tuesday said it expects the Reserve Bank of India (RBI) to raise key rates by 25 basis points in its next month's policy review to tame high inflation .

"We expect thje central bank to hike policy rates by 25 bps in the March 17 policy meeting and by a cumulative 100 bps in calendar year 2011," Goldman said in a research note.

Inflation declined marginally to 8.23 per cent in January from 8.43 per cent in the previous month, as prices of certain commodities like wheat, pulses and sugar eased, although essential items like onion and other vegetables continue to remain dearer. However, it is still above the comfort zone.

RBI is scheduled to come out with its mid-quarterly review of monetary policy on March 17. The central bank has raised rates seven times since March 2010 to fight inflation.

At its third quarterly review last month, RBI revised its inflation estimate to 7 per cent by March-end from the earlier 5.5 per cent. The central bank also hiked short-term lending (repo) and short-term borrowing (reverse repo) rates by 25 basis points each.

The Prime Minister's Economic Advisory Council (PMEAC) had on Monday also said RBI may take further monetary tightening measures to tame inflation.

"RBI will have to take a view looking at the level of inflation. It is still at an uncomfortably high level. Some action, continued action, by the RBI (to tighten monetary policy) may be required," PMEAC Chairman C Rangarajan had said.

Goldman further said it has raised inflation estimate for next fiscal to 6.7 per cent from 6 per cent previously, due to recent upside surprises in agricultural prices, rising input and output price expectations and higher global commodity prices.