Rate hike likely to prevail in future, say economists
By Vaibhav Aggarwal
Jul 27, 2011
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Post the recent shocker by Reserve Bank of India, economists say that further rate hike is still on the cards.

HDFC Bank's Chief Economist, Mr Abheek Barua said, "More rate hikes are likely and could go beyond the 25 bps that we had predicted in September. Tightening is likely to end only if global commodity prices plummet or domestic agri-product prices crash. Neither seem likely. What is the implication? This degree of aggression in monetary policy will begin to bite both into investment and consumption demand. Full-on tightening of monetary policy and easing for that matter is often associated with either ‘undershooting' or overshooting of economic growth below or above the targeted limits Thus, we see the likelihood going forward of a sub-8 per cent growth rate. Credit growth is likely to soften further and a year-end growth figure of 17 per cent could well be possible."

Mr Leif Lybecker Eskesen, Chief Economist for India and Asean, HSBC, said, "We had argued in favour of a 50 bps hike but we did not think that the RBI had the "guts" to bring out the big guns. Thankfully, we were proven wrong."


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