Another 50 bps repo hike in the offing,say analysts

Having been surprised by the repo rate increase on inflation concern,analysts expect new Reserve Bank Governor Raghuram Rajan to hike the key rate by another 0.50 percentage points this fiscal.

The repo rate hike indicates that the new Governor is focusing more on inflation than growth. We now expect RBI to increase repo rate by 0.25 per cent each at the next two policy meetings to 8 per cent by end of 2013, economists at Standard Chartered said.

Stating that the RBI has shifted to an inflation targeting framework without explicitly saying so,Japanese brokerage Nomura said it expects a 0.50 per cent hike in repo rate.

Without quantifying the expected hikes,the Credit Suisse economist also said they expect one or two more repo rate increases from in the next few months. Nomura said that the new framework being charted out lays a greater focus on the retail price rise.