Prerana Goenka and Tushar Goenka

BENGALURU (Reuters] – A Reuters poll of economists found that the Reserve Bank of India will hold off on raising its interest rates for at least four more months, until August.

The RBI has not seen inflation rise above the 6% threshold this year. This casts doubt on their current strategy to keep rates low in order to boost growth, even though central banks have been increasing borrowing costs.

In February’s last meeting, RBI didn’t deliver the small hike in reverse repo rates that was anticipated to help set the scene for raising the reporate, its main tool for policy, to 4.0% from where it is for almost two decades.

Six out of the 50 people polled from March 29 to April 5, predicted that Friday’s repo rates would not change. Threety-two percent of respondents expected the rates to remain unchanged through June.

Twenty-five predicted that the repo rates would increase by 25 basis points (to 4.25%) in the third quarter. While 15 forecasted higher rates of 4.50% to 4.50%, fifteen saw them rise to the top. A rate increase is expected to occur within four months of the meeting of RBI policy makers in early August or late September.

According to a poll conducted in February, nearly half of the 41 participants expected at most one rate rise by June.

Dhiraj Nim, an economist at ANZ, stated, “The major reason we pushed out our repo(rate) hike Q3 was the RBI’s staunch defense of its accommodative stance. Viewing inflation largely as a supply side issue that will pass,”

“Unless the anticipated rise in core inflation does not materialize and inflation eases, I don’t see any reason to delay. This is highly unlikely given the current oil price. “The RBI needs to give more weight inflation in their assessment of policy.”

Although its tone is more dovish than most of its Asian counterparts, the RBI is still well ahead of major central banks such as the U.S. Federal Reserve or the Bank of England when it comes to tackling global inflation.

When asked if the RBI’s Monetary Policy Committee should shift to growth or inflation, 23 out of the 37 people who responded said so, and the other 14 disagreed.

If they want to take action, I think that the MPC members who are extremely cautious need to be given a real reality check about inflation. Miguel Chanco (chief emerging Asia economist, Pantheon Macroeconomics) said that it will likely take them paying more attention to inflation numbers.

GRAPHIC – Reuters Poll – RBI monetary policy: https://fingfx.thomsonreuters.com/gfx/polling/akpezjjwbvr/Reuters%20Poll-%20RBI%20monetary%20policy.PNG

Although inflation was forecasted to peak at 6.1% in the last quarter, it is expected to stay above the RBI’s medium-term goal of 4.0% until at least 2024. The median inflation forecasts were significantly higher than the ones in a January macroeconomic poll.

However, economic growth was downgraded from 9.2% to 8.0% and 7.5% respectively, to 8.7% and 7.5%, respectively. After a lackluster growth period in 2021’s final quarter, this is a downgrade.

36 of 35 economists believed that there would be a low to very low likelihood of India’s economy experiencing stagflation (a period of prolonged high inflation, low growth and sustained low growth) within the next two year. Recently, Shaktikanta das, the Governor of RBI dismissed it as a possibility.

9 of the other respondents agreed that there were high chances for stagflation.

“The European conflict poses risks for higher inflation and slower growth. According to Rahul Bajoria (chief India economist), “India’s policymakers have seen a reduction in their options from a macroeconomic viewpoint.” Barclays (LON:).

(For more stories, see the Reuters global economy poll: