Industry experts and economists expressed surprise at an unexpectedly soft line on inflation that the RBI's Monetary Policy Committee ( MPC) took at today's policy meeting. A couple of them surmised that this may indicate a long pause in its rate action. The repo rate is currently at 6 per cent.

Abheek Barua, Chief Economist, HDFC Bank , said: “This was an unexpectedly dovish policy with the RBI highlighting inflation risks (oil, procurement prices, HRA for government employees) but at the same time revising their forecasts downward. If this is a permanent shift in the paradigm of inflation management from a singular focus on bringing long-term inflation down to 4 per cent to a an approach that is more supportive of growth, then the RBI might go for a long pause. Bond yields that have rallied are likely to move down a little more. However, whether this is a transient bout of ‘dovishness’ or whether it will endure (especially if one of risks were to surface) remains the key question."

Sampath Reddy, Chief Investment Officer, Bajaj Allianz Life Insurance Co , said, "As expected, the RBI kept policy rates unchanged and sounded dovish on inflation, with inflation estimates for H1 & H2 FY19 being cut. We expect the RBI to be on pause for some time, although future policy action will continue to depend on local and as well as global factors

Bond yields had fallen sharply after the announcement of the revised government borrowing programme for H1 FY19 in late March 2018, as the gross borrowing amount was lower than expectations, and the composition of the borrowing was also favourable as it was more tilted towards short to medium term dated securities.

We have been saying for a while that the market had priced in most of the risks, and that yields were elevated. With the recent fall in bond yields, we feel that yields will be range-bound in the near term."

Rajni Thakur, Economist, RBL Bank , while terming the inflation outlook as a 'Goldilocks scenario', said this could very well indicate rates on hold for the whole year . It will boost the general market sentiments and bond markets in particular.

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