The Reserve Bank of India won't cut its key interest rate again until the final quarter of the year as it waits to see how the monsoon season affects food prices, a Reuters poll found.
To try to put growth on a firmer footing, RBI Governor Raghuram Rajan has chopped 25 basis points from the repo rate three times this year, with the latest cut on Tuesday leaving it at 7.25 percent.
The RBI made it clear on Tuesday that more rate cuts would depend on the outcome of India's annual rainy season and government moves to ease the pressure on food prices, which make up almost half the basket of goods used to measure inflation.
The consensus from the poll of over 30 economists suggests the RBI won't cut at its next policy meeting in August but will in the final quarter of the year, unchanged from a poll taken prior to the meeting.
"The scope for another rate cut of 25 bps still remains but its timing will remain contingent on how incoming data pans out and how global triggers - the normalization of monetary policy in the U.S. in particular - unfold," wrote analysts at HDFC Bank.
A below-normal monsoon and stabilising crude prices, which have fallen sharply over the past year, may push inflation higher, particularly through rising food prices.
The U.S. Federal Reserve Bank is expected to hike interest rates in the world's biggest economy in September, according to the latest consensus from economists, but there is still considerable uncertainty over the timing.
Any signs of delaying by the Fed would give the RBI more room to manoeuvre at its next policy meeting in August.
Some analysts say if the rains are favourable it may press ahead with more monetary easing then. Eight of 25 analysts said the RBI would next cut rates before October, while 13 said the move would come in the fourth quarter.
Only four said it would be next year. India's economy grew 7.5 percent year-on-year in the quarter ending March, out-pacing Chinese growth for the second straight time, although many - including the RBI governor - are skeptical about the revamped data series.
However, only two of the analysts polled expect the cash reserve ratio to change from the current 4.0 percent over the forecast horizon.
Rajan made it clear in April the CRR does not impact lending rates.
"The RBI has made it categorically clear that CRR is not a policy instrument.
The impact of a CRR cut on base/market rates is much smaller than lower policy rates," said Radhika Rao, economist at DBS.