Dovish India RBI tone may aid sustained lower yields more than rate cut, traders say
The RBI is set to announce its policy decision on Wednesday, where most economists expect the central bank to hold rates steady but calls for a cut have grown louder in recent days.
"A dovish pause will be better and more positive for markets in the long term than a hawkish rate cut like the one in June," PNB Gilts senior executive vice-president Vijay Sharma said.
"The chances of the 10-year bond yield reaching 6.20% are better with a pause than with a cut."
In June, the RBI surprised markets with a 50-basis-point rate cut but shifted its stance to neutral from accommodative, and signalled limited room for further easing. Bond yields and swap rates rose following the decision, as traders interpreted it as the end of the rate-cutting cycle.
The 10-year benchmark bond yield rose on June 6 and has climbed nearly 20 bps since, while the five-year OIS rate rose by as much as 16 bps.
"The RBI did a lot in the last policy, so it would rather wait to see the impact and another rate cut is unlikely. Also, a cut now may not have the desired impact," said Alok Singh, group head of treasury at CSB Bank.
Barclays expects a dovish pause along with a 30–40 bps reduction in the RBI's inflation forecast of 3.7% for this fiscal year.
Still, expectations for easing have strengthened after the U.S. slapped a 25% tariff on goods from India, which could weigh on growth.
"We believe there are enough reasons for the RBI to deviate from its previous guidance, deliver a further 25 bps easing in August, and adopt a more open-ended approach to future rate cuts," Emkay Global economist Madhavi Arora said. (Reporting by Dharamraj Dhutia; Editing by Rashmi Aich)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Indian Express
22 minutes ago
- Indian Express
RBI Monetary Policy Meet LIVE: Repo rate likely to remain unchanged amid Trump tariffs uncertainty
RBI Repo Rate Cut, RBI Monetary Policy Meeting August 2025 Today Live Updates: The Reserve Bank of India's (RBI) six-member Monetary Policy Committee (MPC) is expected to announce its monetary policy — the third bi-monthly one for FY26 — today. Experts are of the view that the RBI Governor Sanjay Malhotra-led committee may keep the repo rate unchanged after slashing it by a bigger-than-expected 50 basis points (bps) in June. With a total cut of 100 bps between February and June this year, the repo rate currently stands at 5.5 per cent. FY26 inflation projection: The August policy announcement on Tuesday comes after the MPC meeting from August 4 to 6. It was held amid the ongoing rising uncertainties around trade tariffs triggered by US President Donald Trump as well as moderation in headline inflation. If it continues to frontload cuts, a 25 bps cut is not ruled out, say economists including State Bank of India's group chief economic advisor Soumya Kanti Ghosh. The MPC is also expected to revise inflation projection for FY26 downward. Further, the RBI may retain its forecast for real gross domestic product (GDP) growth for the current year. © IE Online Media Services Pvt Ltd
Time of India
22 minutes ago
- Time of India
RBI MPC Meeting August 2025 Live Updates: Will RBI governor Sanjay Malhotra cut repo rate? All eyes on GDP growth outlook amidst Trump's US tariff threats
07:42 (IST) Aug 06 Here's Bajaj Broking Research's view on key focus areas from RBI MPC Meeting: * After reducing the repo rate by a cumulative 100 basis points over the last three meetings—bringing it down from 6.5% in February to 5.5% in June—the committee is now widely expected to maintain the status quo. Most economists believe the MPC will keep both the repo rate and its neutral policy stance unchanged * Consumer Price Index (CPI) inflation eased sharply to 2.1% in June, well below the RBI's 4% target. However, rising core inflation, uneven monsoons, and wage pressures pose upside risks. The MPC may lower its FY26 inflation forecast but is likely to retain a cautious outlook, continuing to monitor emerging risks. The GDP growth projection for FY26 is expected to be left unchanged, indicating measured confidence in domestic demand resilience amid global headwinds * External factors such as recent US tariff hikes and rupee volatility further add to the uncertainty. With these risks in play, the RBI is expected to adopt a 'wait and watch' approach, refraining from additional easing until there is more clarity * Having already front-loaded rate cuts and ensured adequate liquidity, the MPC is likely to pause and allow time for the effects of previous measures to filter through the economy. Any further rate action—if deemed necessary—is anticipated only in October or beyond, once more data on festive demand, agricultural output, and global conditions is available. * Despite adopting a neutral policy stance, the Reserve Bank of India (RBI) has indicated that the Government may still cut the repo rate in the future if circumstances warrant. RBI Governor Sanjay Malhotra clarified after the June 2025 policy meeting that a neutral stance means interest rates can move either way depending on the evolving data. He stated, 'It will depend on how the data comes the growth is weaker, it can mean[the repo rate] will go down. If the growth is good, inflation is going up, the repo rate can go up'
Mint
22 minutes ago
- Mint
Miners, banks propel Australian shares to record high; RBA outlook in focus
Aug 6 (Reuters) - Australian shares rose to a record peak on Wednesday, supported by strong performances among miners and banks, while investors almost fully priced in the likelihood of an interest rate cut by the Reserve Bank of Australia next week. The S&P/ASX 200 index was up 0.6% at 8,820.80 points, as of 0051 GMT. The benchmark crossed the psychologically key level of 8,800 for the first time. Data from ANZ and employment website Indeed on Tuesday showed that job advertisements in Australia fell 1% in July, while separate government figures indicated a modest rise in household spending in June. The soft local data underscored market wagers for a rate cut, with swaps pricing in more than 99% odds of a quarter-point reduction by the central bank on August 12. Global risk appetite improved as odds of a U.S. rate cut in September now stand at about 92%, as per CME Fedwatch, up from 63% seen on July 28. On the local bourse, Australian miners propelled the benchmark index with a 1.1% rise, while gold stocks gained 3.5% on higher iron ore and bullion prices. Banks advanced 0.8%, with the "big four" banks rising between 0.3% and 1.1%. Among individual companies, REA Group was among the top gainers as its shares rose nearly 10%, their biggest intraday percentage gain in 2-1/2 years. The News Corp-controlled Australian property listings firm reported higher annual profit and raised its dividend payout. New Zealand's benchmark S&P/NZX 50 index edged 0.2% higher to 12,904.18 points. The country's jobless rate rose slightly in the second quarter as the labour market remained soft, matching the central bank's forecast. Markets have priced in an 85% chance of a quarter-point rate cut by the Reserve Bank of New Zealand on August 20, with a potential second cut expected by early next year. (Reporting by Shivangi Lahiri in Bengaluru; Editing by Sherry Jacob-Phillips)
