RBI likely to raise policy rates by 25 bps to tame inflation

Faced with stubborn inflation, RBI is likely to raised key policy rates by at least 25 basis points in its annual credit policy for 2011-12 to be announced on Tuesday to arrest the rate of price rise, say bankers.

"Given the macro economic conditions, it is expected that the RBI would hike rates by at least 25 basis points to curb inflationary expectations," Indian Overseas Bank Chairman and Managing Director M Narendra told PTI.

He ruled out the possibility of a 50 basis points hike, indicating that it would not be necessary at this point of time.

In its last review of the credit policy for 2010-11 in March this year, the RBI raised the key policy rates by 25 basis points. The short-term lending (repo) rate was hiked to 6.75 per cent and the short-term borrowing (reverse repo) rate to 5.75 per cent.