Poll shows key rates to remain unchanged

Most money market players expect the Reserve Bank of India (RBI) to keep key interest rates unchanged in its annual policy statement for 2005-06 (April-March), to be unveiled on April 28.

None of the 36 respondents polled by Crisil MarketWire expects the bank rate "" currently at 6 per cent "" to be altered.

The bank rate was last altered on April 30, 2003, when it was cut by 25 basis points to 6.00 per cent. The 5 per cent cash reserve ratio for banks is expected to be left unchanged by all but two respondents. They expect a reduction of 25 basis points in the cash reserve ratio.

The RBI announced a two-stage hike of a total 50 basis points to 5 per cent in September, following a review of liquidity conditions.

But market players were mostly united that the central bank will keep the reverse repo rate, the most watched rate, unchanged at 4.75 per cent.

Only five respondents expect that the reverse repo rate to be hiked to 5.00 per cent from 4.75 per cent.

Sanjeet Singh, vice president, ICICI Securities Ltd, said there's a 30 per cent probability that the reverse repo rate may be hiked by 25 basis points to 5.00 per cent.

"In October, global and domestic economy was on a strong growth path, which made raising interest rates easier. But the case is not the same this time. There is not too much comfort from the recent data if rates are to be hiked. Core trend of inflation is expected to be rising in the medium term. The comfort from base effect will be only temporary. Average inflation is expected to be 5.50 per cent in 2005-06 while point-to-point inflation is expected to be 6.50 per cent. There is a small possibility that the RBI may give a wider band of inflation projection," he added.