RBI's new market-friendly policy indicates there could be more cuts ahead

The decision to lower rates is surprising because the main factor which determines policy decision, i.e. CPI inflation potential remains unchanged

The decision to lower rates by 25 basis points (bps) does come as a surprise though the change in stance was on expected lines. Quite clearly, the Reserve Bank of India (RBI) and the Monetary Policy Committee (MPC) have decided to provide the final push to demand at the end of the fiscal by lowering rates. As four members have voted in favour, this is quite significant as it does indicate that this stance will continue in the new fiscal as well.

The decision to lower rates is surprising because the main factor which determines policy decision, i.e. CPI inflation