The Reserve Bank of India may not ease its monetary policy based on rate actions by the US Federal Reserve, Governor Shaktikanta Das said in the post-policy press conference on Friday.
"Even if the US eases (monetary policy), we may not," Das said, while clarifying that the RBI's actions are determined by domestic conditions on growth and inflation and the outlook.
There is a view that the RBI is guided by how the Fed's monetary policy trajectory progresses. While the impact of monetary policy in advanced economies on Indian markets is considered, the RBI's actions are primarily determined by domestic economic conditions, Das said.
"While we do keep a watch on whether clouds are building up or clearing out in the distant horizon, we play the game according to the local weather and pitch conditions," he said.
Over the last few days, market participants have been unsure about potential cuts in interest rates by the Fed in 2024. While some are expecting two rate cuts—one in September and once more later this year— some are even predicting one or no rate cuts at all.
Traders see a nearly 95% chance of the Fed cutting rates in December, according to the CME FedWatch tool. About 80% of traders expect a cut in November.
The sudden shift in expectations on Fed funds futures is on account of a slower-than-expected economic growth in the US in the March quarter, even as inflation remained sticky. Over the past few months, Fed officials, however, have clarified that they are not in a hurry to cut rates.
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