Not only was a rate cut rabbit pulled out of the hat, but it was also dressed up with the veiled promise of more cuts through a reduction in inflation forecasts. If we look only at headline inflation, a rate cut was a no-brainer. But what tilted the odds to the rate cut were inflationary expectations. This is music to a central bank’s ears, siSarvesh Kumar Sharma/Mintnce monetary policy targets inflation expectations. That explains why bond traders took the rate cut and accompanying statement mildly as yields fell initially, but rose back up during the day.

Source: Mint February 07, 2019 18:56 UTC