The Reserve Bank of India (RBI) will leave its key interest rate unchanged at 6.50% on June 8 and for the rest of 2023 as it waits to see the economic impact of a series of hikes over the past year, a Reuters poll of economists found.
Despite hitting an 18-month low of 4.70% in April, inflation was not expected to fall to the RBI's 4% medium-term target for at least another two years, suggesting rate cuts are unlikely in the immediate future.
All 64 economists in the Reuters poll taken between May 16 and 29 expected no change to the 6.50% repo rate (INREPO=ECI) at the conclusion of the RBI's June 6-8 meeting.
Median forecasts showed the rate has already reached its peak and will stay there for the rest of this year, lower than the 6.75% terminal rate predicted a few months ago.
"Apart from the food price risks, the outlook for inflation looks to be improving ... absent any sharp upside surprises, there is little or zero probability of further rate hikes by the RBI," wrote Dhiraj Nim, economist at ANZ.
"Yet a pivot from their hawkish stance may take longer since inflation is still far above the 4% target, which means the real repo rate is still accommodative."
Among those who had a longer-term view on rates, more than two-thirds of respondents, or 39 of 56, expected rates to remain unchanged until the end of the year.
A quarter of respondents, 14, predicted the repo rate to be 6.25% or lower by then. Three forecast one more hike next quarter to 6.75%.
But by the end of the first quarter next year, more than two-thirds of economists who had a forecast, or 27 of 40, predicted the rate at 6.25% or lower.
Among the remaining 13 respondents, 12 predicted the rate would remain at 6.50%, while one said it would be 6.75%.
Looking further out, median forecasts from a smaller sample showed the RBI would gradually reduce the repo rate next year, reaching 6.00% in the second quarter, then to 5.75% in the third quarter and 5.50% by end-2024.
