Traders in India have reduced their expectations for rate cuts by the RBI following a slower-than-expected inflation decline in the US and cautious commentary from the Federal Reserve. Overnight indexed swaps (OIS), which are used to gauge the direction of interest rates, indicate that traders have scaled back their projections for rate cuts this year. The reduction in rate cut expectations comes as the government has adhered to fiscal consolidation in the budget, which is seen as non-inflationary. Traders are now more inclined towards a smaller rate cut of 25 basis points, compared to the previous expectation of a 50 basis point cut. The OIS rates on Wednesday stood at 6.74% for one-year and 6.37% for five-year swaps. This is a decrease from the rates observed on February 2, which were at 6.60% and 6.14% respectively. The RBI’s recent policy statement emphasised the need for inflation to durably move towards its target of 4%, leading to disappointment among traders who were hoping for easier liquidity conditions. Experts predict that the RBI may implement limited rate cuts of 50 basis points in the second half of the year.