First RBI policy after demonetisation: No changes in key rates

It is to be noted that the present yields on the 10-year bond, which closed at 6.20 per cent on Tuesday, have factored in a sure-fire rate cut.

First RBI policy after demonetisation: No changes in key rates

In a first of policy decision meeting for newest appointed Urjit Patel, Reserve Bank of India Governor has made no changes in repo rate as well as lending rates. Markets prepared for 25-basis point cut in repo rate. However, speculations were high for governor's comment on demonetisation.


Reports have said that Bond market participants expect the six-member monetary policy committee to deliver a 25-basis point cut in repo rate and have taken positions fully factoring in the same. Many in the market differ between 25 or 50 bps cut, but only a few expect a pause. However, in the Monetary Policy Committee (MPC) meeting today RBI decided for no change in repo rate, keeping it at 6.25 and also kept the lending rate the same.


It is to be noted that the present yields on the 10-year bond, which closed at 6.20 per cent on Tuesday, have factored in a sure-fire rate cut. However, the yield is lower than the present repo rate of 6.25 per cent.


Rupee also strengthened past 67 a dollar level, after staying in the 68 zone for a few weeks, as foreign investors likely poured in heavy dollars in the market on Tuesday. It closed at 67.90 a dollar, from its previous close of 68.22 a dollar.


Reports show that the figure for foreign flow in debt and equity is released with a lag. It is likely that the foreigners were a net buyer in the market on Tuesday.