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RBI may hike rates again in Aug on rise in inflation: Analysts

Press Trust of India  |  Mumbai 

Headline surging to a four-month high of 4.87 per cent in May is likely to force the of India (RBI) to hike rates once again at its August review, analysts said.

The commentary comes a day after industry body (CII) said that monetary policy tightening will increase the cost of doing business and force to slowdown on investments, which are critical for pushing the growth agenda.

"With both core and headline only likely to face greater upside pressure from various factors in the coming months, we continue to expect one more 0.25 per cent rate hike from the RBI. This could occur as soon as the July 31-August 1 meeting," analysts at the French brokerage BNP Paribas said in a note.

said a hike is "likely in August".

"If global crude prices remain at current levels and core remains elevated, the next rate hike could be announced sooner (likely in August) than later," it said, adding that the announcement of minimum support prices for agri produce will be watched keenly.

Analysts at German brokerage Deutsche also said they expect a 0.25 per cent rate hike by the RBI at the August review, saying an inflation targeting will feel the need to tighten the policy based on these "signals" from inflation.

However, Lynch said base effects is driving up the inflation number and added that the RBI will be on "long hold".

data released yesterday said jumped to a four-month high of 4.87 per cent in May on such as fruits, vegetables and cereals, coupled with high fuel rates.

In May last year, the was at a low of 2.18 per cent.

At its policy review last week, the had upped its projection by 0.30 per cent and kept the policy stance in the neutral zone, even as it hiked the key rates by 0.25 per cent.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, June 13 2018. 15:25 IST