POLL-RBI to extend rate pause through year-end, likely done hiking

(Repeats poll published on Wednesday with no changes to text.)

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reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/cb-polls?RIC=INREPO%3DECI
RBI poll data

By Madhumita Gokhale

BENGALURU, April 12 (Reuters) – The Reserve Bank of
India will likely keep interest rates unchanged at least until
the end of this fiscal year as it evaluates the delayed impact
of previous hikes on economic growth and high inflation, a
Reuters poll of economists showed.

Last week, the central bank surprised nearly every analyst
by leaving the repo rate unchanged at 6.50% after six
consecutive hikes, signalling it could consider further rate
hikes if necessary.

But a majority of 51 economists now expects the RBI to
remain on hold for the remainder of 2023, despite inflation
hovering near the top end of the 2-6% tolerance range and no
prospect of hitting the mid-point soon, according to the poll.

Only about one-sixth predicted a hike of 25 basis points to
6.75% by the year-end, suggesting the current tightening cycle,
which began last May with an off-cycle move just hours before a
jumbo U.S. Federal Reserve rate hike, is likely already over.

By January-March 2024, the last quarter of the fiscal year,
the median view from the poll still had the repo rate
unchanged at 6.50%, but was split between no move
and a 25 basis point reduction.

In contrast, India’s overnight indexed swap (OIS) rates,
often seen as the clearest indication of future policy rate
actions, are pricing in rate cuts before end-2023.

“We think (the) RBI goes for a long pause now to evaluate
the effect of past rate hikes,” wrote Samiran Chakraborty, chief
economist for India at Citi.

While inflation likely dipped below 6% for the first time
this year to 5.80% in March, it was not expected to reach 4% for
at least two years.

“India will see the policy rates remaining ‘higher for
longer’ as domestic growth-inflation dynamics may not provide
any room for rate cuts in 2023,” wrote Vikas Garg, head of fixed
income at Invesco Mutual Fund.

Out of 31 respondents who answered an additional question,
more than 80%, or 26, said persistently high inflation would be
the reason for the RBI to resume hiking rates, while a minority
said it would be due to the Fed hiking rates beyond current
expectations.

(For other stories from the Reuters global long-term
economic outlook polls package: )

(Reporting by Madhumita Gokhale; Polling by Anant Chandak,
Devayani Sathyan and Veronica Khongwir; Editing by Hari Kishan,
Ross Finley and Bernadette Baum)
((madhumita.gokhale@thomsonreuters.com;))

Keywords: INDIA ECONOMY/POLL (REPEAT, POLL)

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