High food inflation effect- 'RBI may raise policy rates by up to 50 basis points'

High food inflation is most likely to weigh on the Reserve Bank, which is widely expected to raise key policy rates by at least 25 basis points in its monetary review due on Tuesday, top bankers said.  “Conventional wisdom says that there should be at least 25 basis point hike in interest rate,” said State Bank of India Chairman O P Bhatt.

Despite moderating for two weeks, food inflation is still very high at 15.52 per cent on account of rising prices of essential items like vegetables, particularly onion and tomato, fruits, milk and eggs.

A day before he met RBI Governor D Subbarao on January20, Finance Minister Pranab Mukherjee had expressed concern over food inflation saying, “some of the vegetable prices are still high.