Quote on Today's Credit Policy Announcement By Murthy Nagarajan, Tata Mutual Fund
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Below is the Quote on Today's Credit Policy Announcement By Murthy Nagarajan, Head – Fixed Income, Tata Mutual Fund
“RBI hiked the repo rates by 50 basis points but did kept CRR rates unchanged in its monetary policy. The repo rate stands at 4.90 %, Standing Deposit Facility (SDF) at 4.65 % and Marginal Standing Facility ( MSF ) at 5.15 % . RBI Increased its CPI projections for the current year to 6.7 % from 5.7 % projected in its May 4 monetary policy. RBI Governor re iterated to bring down inflation closer to the target and fostering macroeconomic stability. The MPC noted inflation is likely to remain above the upper tolerance band of 6 percent through the first three quarters of 2022-23 .RBI has changed its monetary policy stance to gradual and orderly withdrawal of extraordinary accommodation instituted during the pandemic and dropped its accommodative monetary policy stance. RBI maintained its growth forecast of 7.2 % for the current financial year. RBI Governor also stated it is committed to conduct the government borrowing programme in a non-disruptive manner and is closely watching the yields in the bond markets.
The markets have rallied by 10 to 15 basis in the short end of the yield curve and 5 to 8 basis points in the long end of the yield curve. No CRR hike, short covering by market participants as they feared auction cancellations if they bid at higher yields in the primary auctions, led to this rally . However, forecast of CPI inflation for the current year assumes Average Crude oil prices at 105 per barrel versus 120 dollars per barrel prevailing now. RBI governor has stated 75 % of the increase in CPI forecast is due to food items. Global developments on food and commodities prices is expected to play a key role in determining CPI inflation. We expect the ten-year bond yields to trade in the band of 7.40 %- 7.60 % in the coming months.”
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