RBI to raise policy rates by 25 bps in first quarter of 2019: Goldman Sachs

The Reserve Bank of India is expected to increase policy rates by 25 basis points in the first quarter of the next year, primarily led by inflationary pressures and depreciation of the rupee, says a Goldman Sachs report.

According to the global financial services major, there is likely to be continued upward pressure on core inflation and revised upwards its FY19 inflation forecast to 5.2 per cent (as against 5.3 per cent earlier).

"We continue to believe that the RBI is underestimating the rise in headline inflation, especially given their updated assumptions on oil, INR, and MSP," Goldman Sachs said in a research note.

Besides the prediction of a 25 bps rate hike in the first quarter, Goldman Sachs said RBI is expected to hike policy rates by 25 bps each in the second, third and fourth quarter of 2019.