Credit policy: What do analysts foresee?

The Reserve Bank of India is due to announce its annual policy on 24 April. Analysts believe that the RBI''s decision regarding the hike in interest rates at the credit policy meeting will decide the fate of the market. But they are at loss, to predict exactly what the RBI governor is likely to do. CNBC-TV18 reports:

Market analysts agree that the market is currently at a loss and does not know what to expect, as the RBI governor, Yaga Venugopal Reddy is quite unpredictable.

He may adopt a hawkish stance to rein in inflation, which has breached the 6 per cent mark. Inflation for the week ended April 20 is at 6.09 per cent versus 5.74 per cent for the week ended April 7. This is an eight-tick rise since last week.

The central bank actually intended to do a 50 basis point hike. (100 basis points = 1 per cent). It wanted a half a percentage point hike in the first quarter itself and break it gently to the market by splitting into two rate hikes.

The central bank has been very active trying to curb the liquidity supply in the market. On March 30, RBI had hiked the cash reserve ratio (CRR) as well as the repo rate in a move to curb inflation. It hiked the repo rate with immediate effect by 25 basis points to 7.75 per cent. The CRR was first raised to 6.25 per cent with effect from April 14 and further; it will be hiked to 6.5 per cent from April 28.

Do the precedents suggest that Reddy will raise the rates again?