Inflation the biggest concern: SBI chief

Mr O.P. Bhatt, Chairman, State Bank of India,said: “Inflation is clearly the biggest concern which is underpinned by RBI's upward revision in the inflation projection.

“Given the persistent stickiness in prices, RBI has now projected inflation higher at 8.0 per cent by March 2011 from 7 per cent earlier. This is a quick and steep upward revision. Against this backdrop, it was natural for RBI to hike the repo and reverse repo rates.”

RBI may go aggressive

Ms Rupa Rege Nitsure, Chief Economist, Bank of Baroda, said: Deposit and lending rate hikes are unlikely. Monetary transmission has taken place to a large extent over the last few months. The latest round of hike in key short-term rates by the RBI has already been factored in by banks. Going ahead, to contain surging inflationary pressures, the RBI may go in for aggressive rate hikes.

In this regard, it may be pertinent to note that the monetary policy review does make any reference to its earlier ‘calibrated rate hike' stance.

More hikes in the offing

Mr Abheek Barua, Chief Economist, HDFC Bank

Expectations of a moderation in inflation in first H1FY12 that the central bank had alluded to in its last policy statement in January are conspicuous by their absence.

This along with the upward revision of the March estimate means that not only is the rate hiking cycle in FY12 now likely to be more extended than initially anticipated but is also likely to be far more front-loaded.

We expect inflation to print in at 8.1 per cent in March and move higher close to 9 per cent by August. We see the RBI hiking its repo and reverse repo by another 25 bps in its Annual review in May and this is likely to be followed by 50-75 bps of rate increases through the fiscal year.