Interim Budget reduces RBI rate cut possibility in February, say economists

High expenditure, fiscal deficit slippage point to inflationary tendencies

Chances of a rate cut in the Reserve Bank of India’s (RBI’s) February monetary policy are almost ruled out because the Budget is inflationary in nature, say economists.

Though a section in the market still expects a rate cut in February, the rise in bond yields after the Budget points to a different direction. 

Yields rise, or prices of bonds fall, on oversupply of bonds and on expectations of hardening interest rates. 

The government once again missed the fiscal deficit target, registering a deficit of 3.4 per cent of gross domestic product (GDP) from the 3.3 per cent projection.

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