MUMBAI: The Reserve Bank of India looks set to keep its policy rate on hold on Wednesday, after inflation accelerated to a seven-month high and stronger economic growth reduced the need for monetary stimulus.All but two of 54 analysts in a Reuters Poll said the repo rate would be left at 6.00 per cent, the lowest since November 2010.In August, the RBI made its only cut in 2017, of 25 basis points, and in October, it held.On Wednesday, after a two-day meeting, the RBI is likely to reiterate concern about inflation, as the annual rate increased to 3.58 per cent in October. That's low by Indian standards, but not far from the central bank's 4 per cent target.Another source of RBI discomfort is that core inflation , which excludes food and energy prices, has remained stubbornly high at around 4.5 per cent.The central bank is likely to reiterate a "neutral" stance, thus giving itself flexibility to cut rates in February, even though only seven of the 48 analysts in the Reuters poll who gave a view on 2018's first meeting expect that outcome.Last week, there was welcome news of a recovery in annual economic growth in July-September to 6.3 per cent, from 5.7 per cent the previous quarter. "The recovery is a source of comfort to the RBI as it lowers pressure on them to take a growth-supportive stance," said Radhika Rao, an economist at DBS in Singapore.But the latest pace is still well below the 8 per cent level India needs to create millions of jobs each year for youths.That has sparked renewed calls from some government officials for the RBI, which has cut the repo rate by 200 bps since January 2015, to trim again.While analysts rule out a cut now, some say the central bank could soften its tone somewhat and sound more accommodative. "We don't expect the tone to be outright hawkish as the RBI might need to trim down its growth projections for FY18, which at current levels is optimistic," said Rao, who expects a hold on Wednesday and in February. "But they would still sound cautious on inflation and positive on growth.

Source: Economic Times December 05, 2017 05:15 UTC