Rising inflationary pressure could lead to hike in key rates before Reserve Bank of India?s scheduled policy review on July 27, chief statistician Pronab Sen said on Wednesday. He, however, cautioned the bank against taking a hawkish monetary policy stance, saying too many measures to control inflation could be detrimental to growth.

?As core inflation has now started to get worrying, RBI can raise rates any time. Whether it is Cash reserve ratio (CRR) or repo rate, it depends on the diagnosis of the problem. However, it is not just inflation but full bunch of other sectors that RBI needs to take into account (before tightening of the money supply). Very very strong measures (monetary) can be detrimental to growth,? Sen said.

?We are seeing it (inflation) happen in non-agricultural products. That is one area of worry that has to be tackled,? he said.

?A 10% hike in the fuel prices will cause a 50 basis point spike in the headline inflation in the short term,? Sen said.

While the government has been projecting the economy to expand by 8.5%,it expects the headline inflation to fall to 4.5%-5% by the fiscal-end as a good monsoon increase food production and the high base effect makes the pace of rise in prices look weaker.

Speculation that the RBI would raise policy rates before its July review have been mounting after headline inflation rose to a higher-than-expected 10.16% in May, fueled by over 16% food inflation, the highest rate in the G20 group of leading economies.

Factory output grew at a healthy rate of 17.6% in April, but higher interest rate regime could curtail corporate spending and hit borrowing for new investment ? key to economic growth.

The RBI has raised policy rates twice this year by a total of 50 basis points in March and April. Analysts expect the central bank to raise them by another 50 basis points by the end of the year.

The repo rate, at which it lends to banks, now stands at 5.25% and reverse repo rate, at which it absorbs excess cash from the banking system, is at 3.75%.

Sen, who is scheduled to soon join the government?s influential planning body as an adviser, said headline inflation could dip below 10% in June because of a weakening base effect. Markets are divided over whether the central bank will move ahead of the review although most analysts expect the RBI to wait until July 27 due to liquidity concerns. ?There was no reaction, the market is probably getting used to too much of statements these days,? a trader said.