Uncertain inflation trends may force the RBI to delay rate cuts for a longer period, contrary to what RBI governor Shaktikanta Das said last week about the current pause in the policy repo rate being only temporary.

With inflation likely to remain above the medium-term target of 4 per cent, experts are ruling out a cut in the February meeting of the monetary policy committee (MPC) of the RBI. Thereafter, too, the views are divided with a few expecting a reduction in April, while others saying a cut will be announced only in the third quarter of 2020-21.

At the fifth bi-monthly monetary policy meeting for the fiscal, which ended on Thursday, the RBI unexpectedly left the repo rate unchanged at 5.15 per cent despite the economic slowdown.

Higher retail inflation prompted the RBI to take a decision against the consensus view that the repo rate should be brought down by another 25 basis points. Repo is the overnight rate at which banks borrow from the RBI.

In its policy announcement, the MPC revised upwards the CPI (consumer price index) inflation projection to 5.1-4.7 per cent for the second half of this fiscal and 4-3.8 per cent for the first half of the next fiscal.

After the MPC announced its rate pause last week, Das had said they could have overlooked the rise in October inflation to 4.6 per cent, which was mainly because of a spike in food inflation. However, the central bank’s estimates showed food inflation was likely to remain very high in the first quarter of 2020 .

He added that though core inflation (excluding food and fuel) is expected to remain in the current zone of below 4 per cent, the move to raise telecom tariffs could have some upward impact. Das had indicated that the RBI will wait till the budget and take a call on the policy rate when the MPC meets from February 4-6, 2020.

With the RBI giving more importance to inflation over growth a rate cut is unlikely, given that it has already cut interest rates by 135 basis points so far this calendar year even as inflation remains firm.

”Going forward, we expect food CPI to keep the headline inflation elevated above 5 per cent till February. As such, we estimate 2019-20 retail inflation to be in the range of 4.7-5.3 per cent in the second half of 2019-20, coming in at 4.7 per cent in March 2020,” Abheek Barua, chief economist at HDFC Bank, said.

“Higher inflation readings before the next policy meeting and any announcement of significant fiscal expansion in the budget could lower the possibility of a rate cut in February by the RBI,” Barua said.

Analysts at Motilal Oswal are more hawkish. In a note, they forecast that inflation will remain close to or above 5 per cent by March 2020, which means that a rate cut in the next meeting is unlikely.

“Further, since our projections suggest that inflation will retreat towards 4 per cent only by the third quarter of 2020-21, there is a good probability of a prolonged pause over the next 3-4 quarters,” they added.