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Below is quote on Monetary Policy by Murthy Nagarajan, Head - Fixed Income, Tata Mutual Fund

“RBI has prioritized CPI inflation over Growth . This is a big change as RBI has prioritized growth over CPI Inflation . RBI has up the CPI inflation forecast  to 5.7 % from 4.5 % stated  in the February 2022 monetary policy. RBI has introduced uncollateralized  standing liquidity facility at 3.75 % to absorb surplus liquidity form the system throughout the day.  The next steps expected from  RBI is to move on Repo rate and bring it closer towards CPI inflation over a period of time. Repo rate hikes are expected to start from August 2022 policy. However, RBI has stated the stance remain accommodative and liquidity withdrawal from the system will be over a multi-year period. GDP growth has been lowered to 7.2 % versus 7.8 % stated in the February policy. HTM limits of banks have been increased from 22 to 23 % till March 2023. Given weak credit growth, the ten year is expected to trade in the range of 7.05 – 7.30 % in the coming months.”

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