India’s RBI retains base rate at 6.5% despite market hopes of first cut

Dubai: In a surprise move, India’s central bank has decided to stick to the ‘no rate cut’ policy even though markets and investors had been factoring in a 0.50% trim. This is the 11th straight time the RBI (Reserve Bank of India) has decided to retain India’s repo rate – or short-term lending rate – at 6.5%.

The move comes at a time when the Indian rupee is trending at near all-time lows of 23.02/23.03 against the dirham. Early this month, the rupee was trading at 23.06.
“The rupee had in fact gained a little yesterday as the overwhelming market expectation was that the RBI would cut rates after holding it level for 10 successive meetings,” said an FX analyst. “if the cut had happened, it would have had a stabilising effect on the rupee for the short-term.”

Indian expats in the UAE and Gulf have benefitted from the dirham-rupee levels, with late November and early December seeing higher than average remittance levels.

Why did RBI not cut rates?
The Indian economy’s growth has been showing signs of slowing down, while inflation has not seen much of an easing.