US-based investment banker Goldman Sachs said that Reserve Bank is expected to increase the short term lending rate by half a per cent to rein in inflation. "RBI is expected to hike another 100 basis points through a combination of raising the repo rate, 50 basis points compared to our earlier expectation of 25 basis points and the cash reserve ratio by 50 basis points over the next three months, with risks towards more tightening," Goldman Sachs said in a statement.
The RBI last raised repo rate by 0.25 per cent to 8 per cent on June 11. Inflation has shot up to a 13-year high of 11.05 per cent fuelled by rise in prices of petrol, diesel and cooking gas.
Meanwhile Moody's economist Sherman Chan said, "amid uncomfortably strong inflation, which is now twice as high as the central bank's target rate, the RBI looks set to further tighten monetary policy."
She further said that "There is a good chance that the central bank will not wait until the next formal review which is scheduled for July 29."
Inflation: The silent killer!
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