India’s rupee and sovereign bonds fell after the Reserve Bank of India kept interest rates unchanged as it awaits lenders to pass earlier cuts to customers.
Governor Raghuram Rajan kept the benchmark repurchase rate at 7.50 percent, the Reserve Bank of India said in a statement in Mumbai on Tuesday, a move predicted by 33 of 42 economists in a Bloomberg survey. The rest saw a cut to 7.25 percent.
Rajan lowered the benchmark by 50 basis points in two unscheduled moves this year after a plunge in Brent crude prices helped slow consumer inflation in the net oil-importing nation. Most banks have yet to pass on the previous rate cuts.
“It is a status quo policy,” said Ajay Manglunia, head of fixed income at Edelweiss Financial Services Ltd. “Markets were expecting a dovish statement but were left disappointed.”
The rupee fell 0.1 percent to 62.2550 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg.
The yield on the government bonds due July 2024 climbed seven basis points or 0.07 percentage point to 7.79 percent from Monday’s close of 7.72 percent, prices from the RBI’s trading system show. This is the biggest jump in yields since March 13.
Consumer price gains are set to moderate to 4 percent by August before quickening to 5.8 percent by March, the central bank governor said today.
“Going forward, the accommodative stance of monetary policy will be maintained, but monetary policy actions will be conditioned by incoming data,” Rajan said. RBI will watch for transmission of previous rate cuts, inflation, government measures to ease supply and changes in the U.S. Federal Reserve’s policy, he said.