Experts see another rate hike in April by RBI

Financial services firms are expecting a further hike in the key rates in April by the Reserve Bank of India (RBI), which last week raised the short-term lending and borrowing rates by 25 basis points to contain the runaway inflation.

"We expect the RBI to continue with monetary tightening action during the coming months ... We expect the RBI to hike rates again in the April policy and cumulatively by an additional 100 basis points in 2010," Citi said in a report.

The RBI will announce its annual monetary policy for 2010-11 on April 20.

Last week, the RBI hiked its key short-term lending and borrowing rates to banks by 25 basis points to combat rising headline inflation, which has reach nearly 10 per cent in February. With this move, repo rate stands at 5 per cent while reverse repo rate is at 3.5 per cent.

According to DBS, "The hikes were not expected, chances of an inter-meeting move had been rising with recent higher than-expected inflation prints. We adjust our rate hike trajectory slightly and expect the repo rate to rise to 5.5 per cent and 6 per cent by end-June and end-September, 25 bps higher than forecast earlier."

Financial services provider Edelweiss expects RBI to hike both repo and reverse repo rates further by another 25 basis points each in its April policy.