The relationship between Fed and RBI policies may not be that simple, shows data

The rate cut announced by the US Fed may incentivise more Indian corporates to tap overseas bond markets

US central bank, the Federal Reserve, delivered its first rate cut since 2020 on September 18, reducing the policy rate by 50 bps to a target range of 4.75 to 5 percent range. While a rate cut by the Fed has raised expectations of a similar action by the Indian central bank, analysis shows that the Reserve Bank of India and the Fed have seldom moved in tandem. Of the 113 rate actions (cuts and hikes) tracked over 20 years, RBI has followed Fed cues only 16 times, more so during a hike than a cut. Moreover, a Moneycontrol poll shows that RBI may wait till December before instituting a rate cut.

Fed delivered its first cut since 2020

RBI has rarely moved in tandem with Fed

Following Fed cues more during a crisis and recovery period

Economists expect RBI to wait longer