The Reserve Bank of India is expected to hike the key interest rates by 25 basis points on Friday to tame the near double-digit inflation, a move that may eventually make auto, home and corporate loans more expensive.

With inflation remaining high at 9.78 per cent for August, bankers and economists expect the central bank to continue with hawkish monetary policy and hike rates again at the Mid-quarterly Credit Policy review on Friday. “The current rate of inflation would put pressure on the RBI to further tighten monetary policy. There could be a hike of 25 basis points in key rates by the RBI,” Oriental Bank of Commerce Executive Director S. C. Sinha said. Expressing a similar opinion, Standard Chartered senior economist Anubhuti Sahay said, “Moderation in growth is not yet broad-based. As inflation control remains the central bank's major agenda, we think it is likely to go in for another hike.”

“I think there would be some rate hike this week and could be some more in October policy if inflationary expectations are not anchored,” Indian Overseas Bank Chairman and Managing Director M. Narendra said.

Corporation Bank Chairman and Managing Director Ramnath Pradeep said it was expected that the RBI would further hike interest rates.

YES Bank Chief Economist Subadha Rao said: “August inflation was well above our expectation and worrying point is that core inflation is not easing, which makes it difficult for the central bank to look away but keep the tightening cycle going.''

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