On Tuesday Indian Shares and bonds rose after much softer-than-expected inflation data fuelled hopes of a rate cut by the central bank at its next policy review in August, with some traders even pushing for a move ahead of the meeting.
Data released late on Monday showed consumer inflation, easing to 2.18 % in May, helped by a drop in food prices – the lowest since India started publishing an economy-wide consumer price index in 2012. is now well below the Reserve Bank of India’s medium-term target of 4 %, and at the lower end of its CPI projection of 2 % -3.5 % in the first half of the fiscal year.
The soft data has raised expectations that the RBI will reduce its policy repo rate by 25 bps at its next policy meeting on Aug. 1-2, with some traders speculating a move ahead of that.
India last delivered two rate cuts outside of scheduled meets in early 2015 under the then governor Raghuram Rajan, when the country had not yet adopted a monetary policy committee to decide on rates.
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