Experts see 25 bps hike in key rates in RBI review

Amid expectations of Reserve Bank hiking its policy rates by 25 basis points on Tuesday, RBI Governor D Subbarao today met Finance Minister Pranab Mukherjee.The RBI is scheduled to come up with its second quarter monetary policy review on November 2 for the current financial year, and finance ministry sources said Subbarao discussed macro-economic issues with the finance minister today.In a bid to tame inflation, the central bank has hiked its key short-term lending (repo) and borrowing (reverse) rates five times so far this year and experts see another 25 basis points hike in the key policy rates by RBI on Tuesday.This year, the RBI has raised repo and reverse repo rates by 125 and 175 basis points respectively.It had last hiked rates in its mid-quarterly review on September 16. The repo and reverse repo rate currently stand at 6 per cent and 5 per cent respectively.Food inflation, which is reigning in double digit for the past three months, is feeding into the overall inflation numbers. Food inflation in mid-October stood at 13.75 per cent.The overall inflation for September stood at 8.6 per cent, much above the RBI''s tolerance level of 5-6 per cent.On Tuesday, RBI Governor Subir Gokarn termed high food prices a "structural problem" and cautioned that rising prices would put upward pressure on inflation and rates.Since January, RBI has started reversing its soft monetary policy began in September 2008 when global financial crisis deepened after the collapse of US financial major Lehman Brothers.While a few economist forecast another rate hike on Tuesday, others say a slowdown in factory output numbers of August and core-sector figures of July might force RBI to give a rethink to its rate hike decision.