Policy rates steady ahead of review
A majority of economists expect the Reserve Bank of India (RBI) to leave rates steady ahead of its quarterly review on July 27, a new Reuters poll showed on Friday, but almost all expect the RBI to raise rates in the policy review.
Of 20 economists polled, 15 said they expect no change in the RBI’s main borrowing and lending rates ahead of the July 27 policy review, but 18 of those polled expect the RBI to raise both rates by up to 50 basis points.
In a survey soon after the RBI’s annual policy on April 20, a narrow majority of economists had expected the RBI to raise rates again before the July review.
The RBI has raised the repo rate, at which it lends to banks, and the reverse repo rate, at which it absorbs excess cash from the banking system twice in March and April by 25 basis points.
The repo rate now stands at 5.25 per cent and reverse repo is at 3.75 per cent.
Twelve out of 19 economists polled after the April rate move had expected the RBI to raise the reverse repo rate, its short-term borrowing rate, by 25 basis points by end June.
The new poll showed that none of the 19 analysts see any change in the cash reserve ratio (CRR), the proportion of deposits banks must keep with the RBI. The CRR is at 6 per cent now.
“The RBI will look at domestic conditions and balance growth with inflation. They are comfortable with growth now, but will see how demand-side inflation moves by the next policy review,” said Mr Madan Sabnavis, chief economist at CARE Ratings.
Twelve economists expect the RBI to raise the repo and reverse repo rates by up to 100 basis points by end-December, while five out of 12 economists have predicted a 50 basis point increase.
— Reuters
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