RBI to raise rates.
Mumbai: The RBI is expected to increase the repo rate by 25 basis points in the upcoming monetary policy review as inflation is expected to accelerate further.
It is higher crude prices and the weakness in rupee. The monetary policy committee will start its three- day meeting from October 3 to decide on the fourth bi-monthly monetary policy. After two successive hikes, the repo rate currently stands at 6.50 percent.
Union Bank of India managing director and chief executive Rajkiran Rai G said, "With petrol and diesel prices moving up, there is a strong expectation that inflation will also move up. So, they (RBI) may take a pre-emptive action. I feel there will be an increase of 25 basis points in the repo rate." Despite the rise in oil prices, the headline inflation number came down to 3.69 percent for August as against 4.17 percent for July.
If the RBI increases repo rate by 25 basis points (bps), then it would be the third consecutive rate hike. Experts says the weaker trend in the rupee may also prompt the central bank to raise repo rate. Tracking global developments, the rupee has become weak and is hovering around 73 against the dollar.