Experts broadly welcomed the Reserve Bank's raising key policy rates, saying there was a

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need to control inflationary pressure arising out of the rising global commodity prices.

"Against the policy dilemma to balance economic growth, inflation and liquidity, this rate hike comes at a time when industrial and investment growth is moderating...

It highlights the central bank's emphasis to control demand-led inflation in-light of rising commodity and oil prices on account of external factors," KPMG Executive Director (Monetary Policy) Naresh Makhijani said.

He said the apex bank has kept in mind factors like the disaster in Japan and high prices of commodities like crude in the international market.

"While food prices have started cooling off, higher prices of other commodities like oil... Have neutralised any positive effect arising out of it.

So a reiteration of a tough resolve to tackle inflation and a 25 basis points hike in the policy rates in the mid quarter review seem to be inevitable," Standard Chartered Bank Regional Head (Research) Samiran Chakraborty said.

Political unrest in Middle East and North Africa have taken crude prices to over USD 100 per barrel in the international market.

Chakraborty said if commodity prices continue to rise then the average inflation in the next fiscal would be around 8 per cent.

The headline inflation in the country has been above 8 per cent since February 2010.

ICRA managing director Naresh Takkar said: "The increase in the repo and reverse repo rates by the RBI is in line with expectations... In the event that inflation becomes more generalised and persists at elevated levels, with sustained pressure from oil and commodity prices, the RBI may hike rates further over the next few months," he said.

Crisil Chief Economist D K Joshi concurred with the view and added that the revised projection of inflation at 8 per cent by March-end, from 7 per cent earlier, was achievable.

At its mid-quarterly review today, the RBI raised its short term lending (repo) and borrowing (reverse repo) rates, for the eighth time since March, 2010 and seventh time in this fiscal, by 25 basis points each in a bid to rein in inflation.

The repo rate has been increased from 6.50 per cent to 6.75 per cent, while the reverse repo rate has been raised to 5.75 per cent from 5.50 per cent.

It also raised inflation projection to 8 per cent for March-end against 7 per cent estimated earlier.