Rate cut views recede on hawkish RBI: Reuters Poll

INDIA-ECONOMY-POLL:Rate cut views recede on hawkish RBI: Reuters Poll

mumbai  June 18, 2012, 18:53 IST

mumbai  06 18, 2012, 19:00 IST

 

Indian economists scaled back rate cut forecasts after the Reserve Bank of India unexpectedly left policy rates unchanged on Monday, taking a hawkish stance on inflation despite sluggish growth.

A snap poll by Reuters following the rate decision showed that 10 of 14 participants expect the RBI to keep its key repo rate unchanged at 8 percent at its next policy review on July 31.

The median estimate of 12 respondents for the repo rate at September-end now stands at 8 percent, above the forecast of 7.50 percent in a June 5 poll.

 

"In the real macroeconomic sense, what the RBI has done is the right thing to do," said Ashish Vaidya, executive director and head of trading at UBS in Mumbai.

"However, I had believed politics would prevail over economics, which is the global scene today," he said.

Vaidya was one of the four of 20 who had expected a 50 basis point repo rate cut in the June policy statement. He now expects the repo rate to be eased to 7.25 percent by the end of March 2013, compared with his earlier expectation of 7 percent.

The median poll estimate for the repo rate at the end of the current fiscal year in March is 7.75 percent, compared with 7.50 percent in the previous poll.

The RBI indicated that the burden is on the government to revive growth, saying it had "frontloaded" its policy decision in April with a steep 50 basis point rate cut. It also kept banks' cash reserve ratio on hold on Monday.

(Editing by Tony Munroe)