Reuters poll: RBI to hold rates on December 18

MUMBAI Fri Dec 14, 2012 4:41am IST

A man walks past a logo of the Reserve Bank of India (RBI) in front of its building in Kolkata May 21, 2012. REUTERS/Rupak De Chowdhuri/Files

A man walks past a logo of the Reserve Bank of India (RBI) in front of its building in Kolkata May 21, 2012.

Credit: Reuters/Rupak De Chowdhuri/Files

MUMBAI (Reuters) - The Reserve Bank of India (RBI) is expected to keep interest rates unchanged on Tuesday, according to a new Reuters poll, with respondents split over whether it will cut the cash reserve ratio (CRR) for banks.

The RBI has left rates on hold since a 50 basis point cut in April, and expectations for a further cut have been pushed from December into the first quarter of 2013 following guidance by the central bank in late October.

Of 41 analysts polled, 37 expect the RBI to keep the policy repo rate unchanged at 8 percent in December.

Respondents were almost evenly divided on expectations for a cut in CRR, a tool the Reserve Bank of India has been using to ease a cash crunch and prod banks to loosen lending rates. At 4.25 percent, CRR is at its lowest since 1976.

Of the 33 respondents, 16 expect a CRR cut on Tuesday of either 25 or 50 basis points, while most also expect a further CRR cut in the March quarter.

While expectations are near-unanimous for an interest rate cut in the March quarter, 20 of 36 respondents expect 50 basis points of cuts, which is deeper than the 25 basis point expected in the October pre-policy poll. The RBI is expected to review monetary policy in January and again in March.

"Given the fact that growth is in shambles, and inflation is sort of coming under control, I think they will reiterate the guidance this time and say a rate cut is likely in January," said Abheek Barua, chief economist with HDFC Bank in New Delhi.

RBI Gov. Duvvuri Subbarao said in the October policy review there was a "reasonable likelihood" of further easing in the January-March quarter, when inflation is expected to trend down.

India's economy grew at 5.3 percent in the September quarter and is on track for its slowest performance in a decade for the fiscal year that ends in March.

Headline inflation is expected to rise to 7.6 percent in November from a year earlier, compared with 7.45 percent in October, a separate Reuters poll showed. The data is scheduled around 0630 GMT on Friday.

The central bank has been infusing liquidity in the market by buying bonds through open market operations (OMOs), a practice that many economists expect to continue instead of making further CRR cuts.

"The pecking order for policy most likely would be OMOs followed by CRR cut (in January) followed by repo rate cut (in March)," said Shubhada Rao, chief economist at YES Bank. (Additional reporting by Somya Gupta and Ruby Cherian from Bangalore polling team; Editing by Tony Munroe and Simon Cameron-Moore)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Public Health

REUTERS SHOWCASE

Airtel Profit Jumps

Airtel Profit Jumps

Bharti Q2 net profit more than doubles   Full Article 

Maruti Earnings

Maruti Earnings

Maruti Suzuki net profit up 29 percent, beats estimates.  Full Article 

ICICI Results

ICICI Results

ICICI Bank Q2 profit up 15 percent, beats estimates.  Full Article 

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Market at Record

Market at Record

Sensex, Nifty hit record highs; reforms outpace hawkish Fed.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

End Of QE

End Of QE

U.S. Fed ends bond buying, exhibits confidence in U.S. recovery.  Full Article 

Samsung Results

Samsung Results

Smartphone woes drag Samsung Elec Q3 profit to more than 3-year low.  Full Article 

Refining Margins

Refining Margins

BPCL aims to double refining margins with refinery expansion.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage