Reserve Bank of India to wait at least until August to raise repo rate

The Reserve Bank of India will delay its first interest rate rise by at least four months to August at the earliest, according to a Reuters poll of economists who said the central bank must now start worrying about inflation.

Inflation has held above the RBI`s 6% upper threshold so far this year, casting doubt on its current strategy of keeping rates low to bolster growth even as some central banks are already raising borrowing costs in this cycle.

See Zee Business Live TV Streaming Below:

https://fingfx.thomsonreuters.com/gfx/polling/akpezjjwbvr/Reuters%20Poll...
Inflation was expected to have peaked at 6.1% last quarter but is forecast to remain above the RBI`s 4.0% medium-term target until at least 2024. All median forecasts for inflation were higher than in a previous macroeconomic poll in January.

Economic growth, on the other hand, was downgraded to 8.7% for the previous financial year and 7.5% for the current one, from 9.2% and 8.0%, respectively. This comes after lacklustre growth in the final quarter of 2021.

Twenty-six of 35 economists saw a low or very low chance of the Indian economy entering stagflation, a prolonged period of high inflation and low growth, in the next two years. RBI Governor Shaktikanta Das recently dismissed this as a risk.

The remaining nine respondents said there was a high chance of stagflation.

"The conflict in Europe brings risks of higher inflation and slower growth. From a macroeconomic standpoint, India`s policymakers have experienced a narrowing of their policy options in the last few weeks," noted Rahul Bajoria, chief India economist at Barclays.