The RBI mid-quarter policy review is scheduled tomorrow. On the backdrop of significant headwinds to growth in the economy, the slowdown in the global growth, fear of double dip recession in US and concerns of the euro-sovereign debt crisis RBI's policy action is of key significance.

The RBI has been following a very tough stance with the monetary policy since last 18 months, in an attempt to control inflation.

During the process of controlling the inflation the monetary policy has now started hurting growth, which was reflected in the Industrial Production  figures for the month of July  which slumped sharply to a growth rate   3.3% year on year, registering the slowest growth in 2 years.

On the other hand Inflation was recorded at 9.8% for last month, which is much above the central bank's comfort level.

Recently some Asian Central Banks, like Malaysia, South Korea took a pause in the monetary policy tightening, and Brazil cut interest rates as the growth is slowing down globally.

Would it be the last rate hike, before the pause ?

Many analysts and market participants feel that RBI may hike the key rates by 25 bps before pausing, as the latest inflation figure confirms high core inflation.

The Central Bank is expected to take cognizance of the weakness in the growth figures, heightened uncertainty in the global environment, but with the headline inflation at 9.8% which keeps the RBI in a tough spot, RBI may hike key rates by 25 bps.