The Reserve Bank is likely to go in for another round of rate hike, to the tune of 0.25% in short-term lending rate on Tuesday, and will then pause till March, says a poll conducted by the British lender RBS.
The RBS Clients' Survey in its 10th edition and the third this fiscal, covered 103 local market participants, including corporates (55%), banks, insurers, and mutual funds among others.
"And an overwhelming majority of 67% are sure of a 25 bps hike in the repo rate, and then the RBI to pause till March (sic)," said RBS India Managing Director & Head, Markets, Ramit Bhasin.
However, 30% of the people who took part in the poll expect the central bank to pause this time around. Also, no one expects any change in cash reserve ratio, which is pegged at six% for almost two years now.
Reserve Bank governor Duvvuri Subbarao will unveil the second quarter monetary policy on October 25, and it is widely expected that he will go for yet another tightening.
The central bank has increased its key policy rates-short term lending and borrowing rates or repo and reverse repo, respectively -- a record 12 times since the past 19 months to contain runaway inflation, which has been remaining stubbornly high for the past 13 months. Core inflation stood at 9.72% in September.
Interestingly, a majority of the industry believes we are near the end of the tightening cycle, with a median expectation being not more than 25 bps hike till March 2012, including this policy.
They also expect the repo rates to be stable at 8.5% in December and March.
On the rupee side, majority believe the local unit is headed to trade over 50 against the greenback in the near term, as the fundamentals of the economy look more and more weak on the back of a virtual absence of any policy action on the part of the government.