Interest Rate Hike On The Cards

The vicious circle around the interest rates looks close to completion. After the interest rates were lowered down drastically to boost the economy after the economic bloodbath in the US, looks like things are ready to turn the corner.

The government is contemplating raising the interest rates at least by 25 bps. SBI had recently announced the minimum lending rate at 7.5% and now even the interest rates might see an upward revision

India’s central bank is likely to raise interest rates for the fourth time since March after a strike to protest rising prices brought much of the nation to a halt this month.

The Reserve Bank of India will probably increase its reverse repurchase rate by a quarter-point to 4.25 percent, all 20 forecasts in a Bloomberg News survey showed. It will raise the repurchase rate to 5.75 percent from 5.5 percent at the 11:15 a.m. announcement in Mumbai tomorrow, according to all but one analyst, who expects it to be kept unchanged

via Bloomberg

Amidst all the speculation, the inflationary concerns have become a teething problem for the government and I would not be surprised if the interest rates are indeed hiked.

As for how much the rise in interest rate could be, leading analysts peg the increase to be about 25 bps

India's central bank is widely expected to raise policy rates by at least a quarter per cent, or 25 basis points, this week, to cool double-digit inflation that threatens to drag down growth.
The bond market is betting on the Reserve Bank of India, or RBI, increasing the repurchase, or repo rate, — the rate at which the central bank lends to banks — by 25 basis points and the reverse repurchase rate — the rate that RBI pays to banks which park their excess funds with it — also by 25 basis points in its quarterly monetary review on Tuesday

via ET

The banking stocks might witness some action as a result of this speculation surrounding the rise in interest rates.

What do you think? Is the hike in interest rate imminent given the inflationary concerns?

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