India's Top Forecaster Sees Rajan Holding Rates Until February
- Central bank to keep benchmark rate unchanged Tuesday: survey
- Ten-year sovereign bonds set for second straight monthly drop
India’s most-accurate interest rates forecaster predicts central bank Governor Raghuram Rajan will refrain from cutting borrowing costs for at least two quarters as fiscal policy and food inflation threaten to spoil his work.
“The precondition for the next rate cut will be fiscal consolidation, passage of key economic reforms and food inflation behaving well,” said Gaurav Kapur, a senior economist in Mumbai at Royal Bank of Scotland Group Plc, ranked first by Bloomberg for predicting Reserve Bank of India actions over two years. “If there is a general comfort that food will not play a spoilsport over the next six months, then the RBI may have a window of opportunity to reduce rates after the budget,” typically in February, he said.
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A pause until June would be the longest since the nine months ended December 2014, when concern deficient rains would stoke food costs kept Rajan from easing. A Bloomberg survey of economists suggests the central bank will hold its repurchase rate at 6.75 percent on Tuesday, after cutting it 125 basis points this year, including a larger-than-estimated 50 basis points on Sept. 29.