Inflation in India has spread beyond food and fuel prices which has been above 10% for the past five months .The central bank may have little choice but tighten policy more aggressively than now expected. RBI prefers to take some steps to protect economic growth momentum and does not want to deviate from its stated path of a gradual exit, which could unsettle markets.So we can expect a 25 basis points hike in Repo and Reverse repo rates.
If RBI hikes the Cash Reserve Ratio, that would put pressure on the cost of funds,which can bring some negative sentiments for market.
RBI can surprise the market by raising reverse repo rate by 50 basis point to show their commitment towards controlling inflation and probably raise the repo rate by 25%. That way they are controlling inflation and at the same time not destroying growth.
If RBI hikes the Cash Reserve Ratio, that would put pressure on the cost of funds,which can bring some negative sentiments for market.
RBI can surprise the market by raising reverse repo rate by 50 basis point to show their commitment towards controlling inflation and probably raise the repo rate by 25%. That way they are controlling inflation and at the same time not destroying growth.