Surprise move from the Reserve Bank of India

The Reserve Bank of India has decided to keep the policy rate unchanged despite market expectations of a rate hike. The Reserve Bank of India has paused the tightening cycle it has been implementing since mid-2022. The bank has kept the policy rate at 6.50 percent. Economists who participated in a Bloomberg survey expected the policy rate to be increased by 25 basis points to 6.75 percent. The bank also lowered its inflation expectation for the 2024 fiscal year from 5.3 percent to 5.2 percent. Following the Reserve Bank of India’s surprise decision, the yield on India’s 5-year bonds fell by 13 basis points to 7.02 percent. The bank had decided to increase interest rates at every meeting since May 2022. Reserve Bank of India Governor Shaktikanta Das stated that the decision was taken unanimously. Das said that the bank would not hesitate to make moves in upcoming meetings if necessary. Finally, while the Reserve Bank of Australia also paused tightening, it was seen that the course of inflation in India has not yet settled at a moderate level. Core inflation in the country has been above 6 percent for 1.5 years.