Rate hike to follow global cues

Global factors in the play again  We could credibly claim that with GDP growth above-trend, brisk industrial demand, inflation threatening to breach the RBI comfort zone of 5.0-5.5 per cent and continued surge in credit growth (a view not shared by many analysts), all justify another reverse repo rate hike, despite the fact that the previous hike occurred barely six weeks ago.  The unscheduled rate hike in June was in part driven by the emergence of global factors acquiring greater weightage than before. The central bank is likely to reiterate the significance of these factors, which have strengthened even further despite the fact that the US Federal  Reserve is heading towards the end of its rate hiking spree. While fundamentals indicate that a rate hike is warranted, the key risk to our baseline scenario of a 25 bps reverse repo rate hike emanates from the events since RBI