RBI to keep rates steady over the next 18 months: Poll

Earlier this month, the Reserve Bank of India raised a secondary rate while holding the key repo rate steady to mop up excess liquidity from the government's demonetisation drive, making it the fourth meeting in a row it has surprised markets.The Reserve Bank of India is expected to keep interest rates steady well into next year after it shifted to a neutral monetary policy stance in February, and despite having raised concerns over a potential spike in inflation, a Reuters poll found.Earlier this month, the Reserve Bank of India raised a secondary rate while holding the key repo rate steady to mop up excess liquidity from the government's demonetisation drive, making it the fourth meeting in a row it has surprised markets.

The median consensus in the poll of more than 35 economists, conducted between April 10-19, was for the policy repo rate to remain at 6.25 percent until the fourth quarter of 2018 at least, and the reverse repo rate at 6.00 percent."Inflation continues to be the biggest factor worrying the central bank.

 Given this, an easy monetary policy stance is ruled out for now," wrote Dharmakirti Joshi, principal economist at Crisil.Consumer prices rose an annual 3.81 percent last month, the fastest pace since October 2016, inching closer to the RBI's 4 percent target, lending weight to the central bank's decision to step away from easing any further.Economists expect inflation to be at 5.0 percent for the 2017/18 fiscal year. This compares with the latest predictions from the RBI, which sees the rate at 4.5 percent in the first half of the year and 5.0 percent in the second half.Much will depend on India's monsoon, or rainy season, crucial in a country where most of the population depends on agriculture, and will determine whether food inflation will remain in check.

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