New Delhi: The US Federal Reserve’s (Fed) keeping its key interest rate unchanged will be positive for the Indian bond and currency markets and will push the RBI to consider a third rate cut, experts said on Thursday. The US Fed on Wednesday held its interest rates steady and signalled little appetite to adjust them any time soon. This may nudge the Resrve Bank of India (RBI) to cut rates for the third time in succesion, according to experts.
Following its second cut by 25 basis points to its repo, or short-term lending rate for commercial banks, at its first bi-monthly monetary policy review of the fiscal in April, the RBI’s key interest rate currently stands at 6 per cent.
The rupee was trading during Thursday early trade at 69.57 to a dollar, down 1 paise on its previous close of 69.56. In debt markets, yields on the 10-year government bonds were down 0.13 per cent to 7.40 per cent, from its previous close of 7.41 per cent
“If US Fed has not changed rates that will give policy makers in India a chance to cut rates, also since inflation rates are going downwards. So there is likelihood of RBI cutting rates.
“If Fed had increased the rates then RBI would not have been in a position to cut rates,” Hatim Broachwala, analyst at IDBI Capital Markets & Securities said.
“The RBI, however, will not go by just the Fed rate being steady while deciding on the repo rate cut..there will be other factors for RBI to consider as well. Fed rate status will be one of the factors,” he added. He also said the Fed rate being unchanged would strengthen the Indian currency and bond yields will be positive as they will be marginally down. (IANS)
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