A leading banker today said that it was natural for the Reserve Bank of India to hike the repo and reverse repo rates as inflation is still high and its projection for FY 11 has also been revised upwards to eight per cent. "Given the persistent stickiness in prices,RBI has now projected inflation higher at 8 per cent by March 2011 from the earlier 7 per cent. This is a quick and steep upward revision. Against this backdrop,it was natural for RBI to hike the repo and reverse repo rates," State Bank of India's Chairman,O P Bhatt,said in a statement here today. Inflation is clearly the biggest concern of the apex bank "which is underpinned by RBI's upward revision in the inflation projection," he said. RBS NV India country executive and chairperson Meera Sanyal described the Reserve Bank's stance as "hawkish" and said that the apex bank is concerned with rising inflationary pressures. The 0.25 per cent hike each in repo and reverse repo rates effected today was on expected lines,she said. On the RBI upping its inflation estimate for FY 11 to 8 per cent,she said,"this too is in line with trend as we see food and fuel prices moving in only one way (upwards)." She described the 8 per cent inflation projection for this fiscal as "realistic." Going forward,she expected a further 0.50 per cent hike in rates. "Our interpretation (of today's RBI announcement) is that over the next quarter,inflation will be critical for the RBI," she said.
