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Jun 19, 2012, 10.11 AM IST
Indian economists scaled back rate cut forecasts after the Reserve Bank of India unexpectedly left policy rates unchanged on Monday, taking a hawkish stance on inflation despite sluggish growth.
A snap poll by Reuters following the rate decision showed that 10 of 14 participants expect the RBI to keep its key repo rate unchanged at 8% at its next policy review on July 31.
The median estimate of 12 respondents for the repo rate at September-end now stands at 8%, above the forecast of 7.50% in a June 5 poll.
"In the real macroeconomic sense, what the RBI has done is the right thing to do," said Ashish Vaidya, executive director and head of trading at UBS in Mumbai.
"However, I had believed politics would prevail over economics, which is the global scene today," he said.
Vaidya was one of the four of 20 who had expected a 50 basis point repo rate cut in the June policy statement. He now expects the repo rate to be eased to 7.25% by the end of March 2013, compared with his earlier expectation of 7%.
The median poll estimate for the repo rate at the end of the current fiscal year in March is 7.75%, compared with 7.50% in the previous poll.
The RBI indicated that the burden is on the government to revive growth, saying it had "frontloaded" its policy decision in April with a steep 50 basis point rate cut. It also kept banks' cash reserve ratio on hold on Monday.
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