Market sees Raghuram Rajan holding rates on Tuesday: RBS survey

Jan 23 2014, 23:04 IST
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Market does not expect a rate reduction even in March this year, RBS said. Reuters Market does not expect a rate reduction even in March this year, RBS said. Reuters
SummaryMarket does not expect a rate reduction even in March this year, RBS said.

The market expects Reserve Bank Governor Raghuram Rajan to hold interest rates at its policy review meeting on Tuesday, a survey has found.

In addition, the market does not expect a rate reduction even in March, Royal Bank of Scotland (RBS) said.

RBS, citing its 19th survey on quarterly monetary policy review, said it took the views of 150 local market participants, including corporate clients, banks, insurance companies and mutual funds, among others.

More than 80 per cent of the respondents expect Rajan to leave both the repo rate as well as cash reserve ratio unchanged.

However, about 19 per cent expect a 25 bps increase in the repo rate on January 28, the survey showed.

Optimism against a rate increase stems from headline inflation, which came in at a surprisingly low 6.12 per cent in December, while retail inflation eased to 9.52 per cent.

Post-policy, about 46 per cent of the respondents want to sell the rupee on upticks, with median expectations of 61.75 by March. Their medium-term expectation is the local currency will remain in the 60-65 range against the dollar.

Rajan increased the repo rate, at which banks borrow from the RBI, by 25 bps each in September and October to 7.75 per cent. He has not tweaked the cash reserve ratio, which is pegged at 4 per cent now.

In the mid-quarter policy review on December 18, the RBI left the key rates unchanged.

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