RBI To Raise Rates Once More After April Meeting: Report

The Reserve Bank of India (RBI) will increase its main interest rate by 25 basis points on 6 April and hold the rate steady for the rest of the year, according to a Reuters story based on their survey of economists from 23 to 28 March.

Still, the central bank is expected to maintain its tightening stance.

India has inflation above the RBI's 6 per cent tolerance limit — which is a key reason for another hike by the central bank.

Inflation was at 6.52 per cent in January and then eased slightly to 6.44 per cent in February.

In the poll, 49 out of 62 economists believe that the RBI will increase its repo rate by 25 basis points to 6.75 per cent, marking a seven-year high, after its 3-6 April meeting.

Most economists in the poll predict the RBI will maintain a steady rate over the rest of the year.

The Monetary Policy Committee's increase, if implemented, would make a total of 275 basis points since last May, which is relatively modest when compared to other central banks like the United States Federal Reserve, which began much earlier.

Twenty out of 36 respondents expect the central bank to stick with its withdrawal of accommodation stance at the April meeting, while 16 believe it will shift to a neutral stance.

Out of 33 respondents, 18 believe that the bigger risk to their terminal rate forecast was it being higher than expected, while the other 15 believe it to be lower.

Survey indicates inflation expected to average 6.7 per cent in current fiscal year, then drop to 5.2 per cent in the next, though remaining higher than the 4 per cent medium-term target.

The Indian economy's growth forecast remains at 6.9 per cent for this fiscal year and 6 per cent for the next.