Reserve Bank of India to hold rates in August, first cut in Q4: Reuters poll
Reserve Bank of India (RBI) will keep interest rates steady for a ninth straight meeting in August due to persistently high inflation, with a slim majority of economists in a Reuters poll expecting the first rate cut next quarter.
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A sharp spike in food prices drove inflation in Asia's third-largest economy to a five-month high of 5.08% in June, well above the RBI's 4% medium-term target, suggesting the central bank will be wary of easing monetary policy too soon.
With gross domestic product (GDP) growth of around 8% over the past few years — the fastest among major world economies — and inflation not expected to fall to 4% anytime soon, the RBI has little reason to rush an interest rate cut.
All 59 economists in the latest Reuters poll predicted the RBI would hold the repo rate at 6.50% at the conclusion of its August 6-8 meeting. It was the first rates survey taken after the July 23 budget, in which the government kept borrowing targets in check.
«We still believe the RBI will keep rates on hold at the upcoming meeting...but expect to see a first rate cut in Q4. With the headline number picking up again in June, inflation has remained too high for policymakers to consider a dovish move just yet,» said Alexandra Hermann, lead economist at Oxford Economics.
«Given economic growth momentum is still strong, the RBI faces less of
