* 5 of 13 see repo rate up 25-50 bps by March 2009;
* 2 of 13 see a rate cut by next March 2009
* 7 of 11 see cash reserve ratio up 25-75 bps by March
(Repeats item to fix format of table)
By Saikat Chatterjee and Swati Bhat
MUMBAI, Sept 11 (Reuters) - Indian economists have scaled
back expectations of further interest rate increases in 2008/09
as recent policy tightenings and falling oil prices are seen
calming double-digit inflation.
Slowing growth would also be a concern for the central bank,
they said.
New Reserve Bank of India (RBI) Governor Duvvuri Subbarao
said on Tuesday he would monitor the price situation closely and
take appropriate action, but would be mindful of the implications
of the central bank's stance on growth. See [ID:nDEL306897].
Five out of 13 economists polled by Reuters expected the
central bank to raise its key lending rate, the repo rate
<INREPO=ECI>, by 25 to 50 basis points before the end of the
fiscal year in March 2009. Four of the five expected the next
hike to come at the RBI's next scheduled review on Oct. 24.
This is a major shift in market thinking.
After the central bank increased the repo rate and the cash
reserve ratio at its last review in July, eight out of 10
analysts had expected more rate rises. None at that time forecast
a cut.
In the latest poll, two economists said the central bank's
next move would be a cut in early 2009. That would mark the first
lowering of the repo rate since March 2004.
"We do not expect any further repo rate hikes because of
easing commodity prices, aggressive policy tightening already in
place, and clear signs of growth moderation," said Sonal Varma,
an economist at Lehman Brothers in Mumbai.
TIGHTENING
The central bank raised its lending rate by 125 basis points
in three moves in June and July. It has also raised the cash
reserve ratio <INCRR=ECI> by 150 basis points so far in 2008.
Annual economic growth in the April-June quarter quarter
slowed to 7.9 percent, its slowest in 3-½ years.
Market forecasts for full-year growth have been cut to around
7.5 percent from rates of 9 percent or more in the previous three
years.
Annual inflation as measured by wholesale prices, the most
widely watched measure in India, has moderated from a high of
12.63 percent in early August and data later on Thursday is
expected to show it dipped below 12 percent at the end of that
month. [ID:nBOM172114]
The inflation picture is complicated, however. Data has had
significant upward revisions in recent months, meaning the actual
rate may have come closer to or even touched 13 percent.
Economists and Subbarao have cautioned against reading too
much into the moderation just yet, and some say price growth will
peak towards the end of the calendar year at between 13-14
percent before easing into single digits early in 2009.
As a result, several economists wanted to see what happened
at the October review before taking a view on the rest of the
year.
Seven out of 11 analysts expect the central bank to raise the
cash reserve ratio by 25-75 basis points by March to drain excess
inflation-fuelling cash from the money markets.
Three out of the 12 polled expected the central bank to raise
its main borrowing rate, the reverse-repo rate <INRREP=ECI>, by
25-100 basis points by next March. The rate has been at 6 percent
since July 2006.
For a graphic of Indian inflation and interest rates, please
see: https://customers.reuters.com/d/graphics/IN_RTPL0908.gif
Following is a table of poll responses. Economists were asked
whether they expected a change in these rates in October and then
before the financial year ended in March 2009.
FORECASTS FOR CHANGES IN REPO RATE
-------------------------------------------------------------
Respondent In Oct Policy By end of FY09
-------------------------------------------------------------
* MF Global +25 bps
Macquarie +25 bps No change
Standard Chartered +50 bps No Change
CRISIL +25 bps No View
Kotak Mahindra Bank +25 bps No View
Axis Bank No Change -25 bps
IEG No Change -25 bps
Lehman Brothers No Change No Change
Bank of Baroda No Change No Change
Yes Bank No Change No Change
ICICI Securities No Change No Change
Indicus Analytics No Change No Change
CMIE No Change No View
------------------------------------------------------------
FORECASTS FOR CHANGES IN REVERSE REPO
------------------------------------------------------------
Respondent In Oct Policy By end of FY09
-------------------------------------------------------------
CMIE +25 bps No View
* Standard Chartered +100 bps
* MF Global +25 bps
Lehman Brothers No Change No Change
Bank of Baroda No Change No Change
Yes Bank No Change No Change
Axis Bank No Change No Change
ICICI Securities No Change No Change
Kotak Mahindra Bank No Change No Change
IEG No Change No Change
Indicus Analytics No Change No Change
Macquarie No Change No View
------------------------------------------------------------
FORECASTS FOR CHANGES CASH RESERVE RATIO
------------------------------------------------------------
Respondent In Oct Policy By end of FY09
-------------------------------------------------------------
Lehman Brothers +25 bps No Change
Bank of Baroda +25 bps No View
Kotak Mahindra Bank +25 bps No View
* Standard Chartered +75 bps
* MF Global +50 bps
* Yes Bank +25-50 bps
ICICI Securities No Change +50 bps
CMIE No Change No View
Macquarie No Change No View
IEG No Change No Change
Indicus Analytics No Change No Change
------------------------------------------------------------
* Economists sees a change by end of the financial year, but did
not want to forecast the exact timing of the move.
(Additional reporting Rajkumar Ray and Surojit Gupta in NEW
DELHI; editing by John Mair)
(([email protected]; +91 22 6636 9035;
Reuters Messaging: [email protected]))
Keywords: INDIA ECONOMY/RATES