Headline inflation surging to a four-month high of 4.87 per cent in May is likely to force the Reserve Bank of India to hike rates once again at its August monetary policy review, analysts said.
The commentary comes a day after industry body Confederation of Indian Industry said that monetary policy tightening will increase the cost of doing business and force India Inc to slowdown on investments, which are critical for pushing the growth agenda.
“With both core and headline inflation only likely to face greater upside pressure from various factors in the coming months, we continue to expect one more 0.25 per cent rate hike from the RBI. This could occur as soon as the July 31-August 1 meeting,” analysts at the French brokerage BNP Paribas said in a note.
