HSBC reveals RBI to raise rate by more 75 bps

The Reserve Bank of India’s latest move to hike interest rate by 25 basis points came in line with market expectations. There was a general sentiment in the market that a hike of 25 basis points was necessary to balance inflationary pressure.
However, according to HSBC, the RBI will raise interest rate by another 75 basis points this year in order to control inflation. HSBC feels that inflation is unlikely ease soon and it will go above the RBI’s comfort zone.

“Demand needs to slow down in a bid to ease inflationary pressure,” said HSBC. The bank also added that growth rate in FY12 is likely to slow down to 8%.