With spiralling inflation pinching pockets, the Reserve Bank of India (RBI) is likely to continue its fight against price rise by hiking short-term lending (repo rate) and borrowing (reverse repo rate) by 25 basis points (bps) (100 basis points is 1 percentage point) in its mid-term policy review on Thursday.
Since March 2010, the RBI has hiked repo rate by 175 bps and reverse repo rate by 225 bps.
The repo and reverse repo rates currently stand at 6.5% and 5.5%, respectively.
"Based on continued high inflation at more than 8%, I expect a 25 bps increase in repo and reverse repo rates. This is unlikely to have a perceptible impact on the liquidity scenario although real estate will be adversely impacted," said Shanto Ghosh, principal economist, Deloitte.