RBI Keeps Interest Rates Unchanged at 7.5%

The Reserve Bank of India (RBI) left its benchmark lending rate unchanged on Tuesday but kept the door open for further easing.

The central bank kept its main repo rate at 7.5 percent after last month’s surprise cut but said it would maintain an accommodative policy stance, Dow Jones reported.

The decision was in line with the expectations of majority of economists polled by Reuters. Just nine of the 40 economists surveyed last week expected a rate cut at this meeting.

Indian stocks edged down 0.3 percent after the RBI decision. The rupee fell 0.2 percent in a knee-jerk reaction against the U.S. dollar.

While the RBI will no doubt keep an eye on the Federal Reserve’s policy path, Governor Raghuram Rajan said the U.S. central bank will not be the key factor in determining future rate moves.

The RBI said it’s waiting to see the transmission by banks of past interest rate cuts and for more data points before taking further action on the policy front. It has cut rates twice this year, in January and March, by a total of 50 basis points.

“Developments in sectoral prices, especially those of food, will be monitored, as will the effects of recent weather disturbances and the likely strength of the monsoon, as the Reserve Bank stays vigilant to any threats to the disinflation that is underway,” the RBI said in its monetary policy statement.

via CNBC

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza