MUMBAI: The Reserve Bank of India (RBI) is likely to raise interest rates again in its quarterly review on July 27, a new survey found, and rates at
the end of the year are likely to be higher than forecast before Friday's unexpected 25 basis point rise.
The majority of analysts surveyed in Monday's poll expect rates to be 25 basis points higher on July 27 than they did in a similar survey last month.
Nearly all economists surveyed expect the RBI to raise its short-term repo lending rate by 25 basis points to 5.75 per cent on July 27.
Most also expect a 25 basis point rise to 4.25 per cent in the reverse repo rate, at which the RBI absorbs excess cash from the banking system, in the review.
The RBI late on Friday raised its main lending rate, or repo rate to 5.5 per cent from 5.25 per cent, and the reverse repo rate to 4.0 per cent, from 3.75 per cent to contain inflationary pressures in Asia's third-biggest economy.
Economists were divided on how much the central bank would raise the repo rate by the end of December, with eight expecting the repo rate to rise by 50 basis points to 6 per cent, and seven predicting an increase the repo rate by 75 bps to 6.25 per cent.
In a poll last month, the median forecast was for the repo rate to reach 5.75 per cent at the end of December, although a similar number of analysts had predicted a year-end repo rate level of 6 per cent.
Economists were similarly split on their year-end outlook for the reverse repo rate, with seven respondents expecting a 75 basis point increase to 4.75 per cent and six expecting a 50 basis point increase to 4.50 per cent.
In last month's poll, the median forecast of 13 economists for the reverse repo rate at the end of 2010 was 4.25 per cent. However, an equal number of economists in last month's poll forecast the year-end reverse repo rate to be either 4.25 per cent or 4.50 per cent.
None of the 16 economists polled on Monday see any change in the cash reserve ratio (CRR), the proportion of deposits banks must keep in reserve with the central bank, in the July 27 policy review, although seven out of nine see a CRR rise of up to 50 basis points by the end of December.
Out of 13 economists with a view, 10 said the central bank's policy tightening had been appropriate, and 3 wanted the RBI to be more aggressive in raising rates.