A February Reserve Bank of India rate cut is on a knife's edge, with just under half of economists polled expecting easing at that meeting, and is highly likely by the middle of next year, according to a Reuters poll.
After slashing the repo rate by 135 basis points this year to 5.15 per cent, the RBI cited concern about near-term inflation when it took analysts and markets by surprise and kept it unchanged last week, pushing stocks and the rupee lower.
But the central bank acknowledged there was room for further cuts.
With economic growth at its weakest in over six years, 49 per cent of economists, 33 of 67, in a snap poll taken after the Monetary Policy Committee's decision, predicted that would be a temporary pause and another cut would come in February.
The others expected no move at the February 4-6 meeting.
"The MPC has retained its 'accommodative' policy stance, which suggests that this is a pause rather than an end to the loosening cycle," said Darren Aw, Asia economist at Capital Economics.
A firm majority, over 80 per cent economists said the RBI will cut rates by end-June, with the median forecast for a 25-basis point trim to 4.90 per cent, and then stay on the sidelines for the rest of the year.
"Timing the next RBI move has become precarious after it chose to abstain from additional front-loading, despite a sharp growth downgrade and below-target inflation forecast with balanced risks," said Abhishek Upadhyay, senior economist at ICICI Securities.
"We suspect higher inflation and fiscal risks could push any further cut to the next fiscal year, perhaps in June with the risk that we have already reached the end of the rate cut cycle."
When asked what the central bank's next move should be, instead of what the RBI will deliver, all but three of 45 economists also said a cut, with the median of those responses recommending 25 basis points.
And in response to a separate question, 35 of 52 economists said they were confident the RBI would cut rates soon. The remaining 17 contributors said they were not confident, mostly citing expectations for elevated inflation.
A separate Reuters poll of 52 economists taken December 5-10 predicted inflation rose last month to over a three-year high of 5.26 per cent from October's 4.62 per cent, largely driven by a continued surge in vegetable prices, particularly onions - an important ingredient in the kitchens of more than 1.2 billion Indians.
"While multiple data shows lack of inflation pressure in the economy, onion prices - within the food component - have been the biggest driver of headline inflation and this cannot be influenced by monetary policy actions," said Kunal Kundu, India economist at Societe Generale.
But even though inflation has turned up recently, the RBI took many forecasters and traders off guard at the December meeting as policymakers had given no signal after a rapid-fire succession of cuts this year it was about to pause.
When asked if that decision had damaged the RBI's credibility, 70 per cent - 39 of 53 - of economists said 'not at all'. Eleven contributors said it had "a bit" and three said "a lot".
"In terms of providing monetary policy accommodation they feel that they are already doing enough right now and they want to see more transmission before they cut more if they have to," said Sakshi Gupta, senior India economist at HDFC Bank.
"In this cycle, they have already delivered a significant amount of cuts and they probably want to wait and watch what is happening with inflation before they cut more."