(Repeats story that ran earlier on Thursday, with no change to
text)
By Dharamraj Dhutia and Nimesh Vora
MUMBAI, Feb 9 (Reuters) - The Reserve Bank of India is
likely to raise interest rates once again in April as inflation
pressures persist and the Federal Reserve continues to tighten,
analysts said on Thursday, a day after the central bank
delivered what many had expected to be its last hike in the
current cycle.
The RBI raised the repo rate by a widely expected 25 basis
points (bps) on Wednesday, in its sixth straight rate hike in a
row that took the total to 250 bps in the current fiscal year.
However, the central bank surprised markets by leaving the
door open to more tightening, saying the stickiness of core
inflation was concerning.
"A more aggressive projection of growth-inflation profile
and (policymakers') cautious commentary has led us to add
another 25-bps hike in April 2023 to our base case," said
Samiran Chakraborty, Citi's chief India economist.
The RBI also kept its policy stance at 'withdrawal of
accommodation', rather than shifting to 'neutral'.
"By retaining the stance, the RBI left room open for further
tightening. We continue to expect the RBI to hike 25 bps further
in the April meeting, on sticky core inflation and a reversal in
vegetable prices," said Santanu Sengupta, chief India economist
at Goldman Sachs.
ING and QuantanEco Research also now expect the RBI to hike
the repo rate at its next policy decision, due on April 6.
But that is not only due to worries about inflation.
RUPEE PRESSURE
Traders said the rupee's movement and the Fed's rate outlook
will also likely influence the RBI.
"We think the developments on the external front played an
equally important role in RBI taking a hawkish tone," Pranjul
Bhandari, chief India and Indonesia economist at HSBC, said in a
note.
She pointed out that the latest meeting came on the heels of
foreign investors pulling $4.4 billion from Indian equities so
far this year.
"And even though the rupee has been amongst the more stable
Asian currencies in 2022 (as per RBI's analysis in its policy
statement), we note that the rupee has underperformed the region
in the last few weeks," Bhandari said.
The rupee is currently at 82.62 to the dollar, less
than 1% away from the record low of 83.29 it hit last October.
The change in expectations around the Fed rate outlook since
the better-than-expected U.S. jobs report on Friday may keep the
rupee and other Asian currencies under pressure.
Investors now expect a 25-bps rate hike in each of the Fed's
next two meetings. There were doubts about even one before the
jobs report.
The continuous increase in Fed funds rate expectations, SBI
Research said in a note, has made it a difficult proposition for
central banks in emerging economies to take policy decisions.
(Reporting by Dharamraj Dhutia; Editing by Savio D'Souza)
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