Further rise in inflation may trigger RBI rate hike: HDFC

The Reserve Bank of India (RBI) is likely to wait for a further rise in inflation before it raises its benchmark lending and borrowing rates around December or January, HDFC Bank said today.

The private sector lender, however, expects RBI to hold key rates in its monetary policy review due next week.

"Our bet is that the RBI will wait until December- January period when inflation actually spikes up before changing policy rates. However, we continue to believe that the policy will maintain status quo (on Oct 27)," HDFC Bank Chief Economist Abheek Barua said in a note.

He said it was unlikely for the RBI to embark on an "aggressive rate hike cycle", even if it were to move rates upward.

"If the central bank is indeed looking for reasons to delay its exit from its super-accommodative monetary stance, the recent inflation prints certainly gives it one," Barua added.

India's wholesale price index (WPI) inflation rose to 1.21 per cent for the week ended October 10 from 0.92 per cent in the previous week. HDFC Bank expects WPI inflation to moderate in the second half of FY10.

Barua said a robust industrial production data for August at 10.4 per cent has raised the probability of a rate hike in the October 27 policy.