RBI Policy

6 Apr 2023

G-sec yields curve to steepen -RBI Monetary Policy Review-Apr 23

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RBI’s pause in rate hike decision is against market expectations of minimum 25 bps hike. Consequently, the g-sec yields curve is likely to steepen from the current levels with short term yields of falling. System liquidity is expected to remain comfortable going ahead.

author dp
Subhasis Mishra

Considering the current economic scenario, RBI Monetary Policy Committee has decided to keep the policy repo rate unchanged at 6.50%.

  • The standing deposit facility (SDF) rate remains unchanged at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%.
  • Inflation projection -On the assumption of a normal monsoon, CPI inflation is projected at 5.2% for 2023-24, with Q1 at 5.1%, Q2 at 5.4%, Q3 at 5.4% and Q4 at 5.2%.

  • GDP growth-Real GDP growth for 2023-24 is projected at 6.5% with Q1 at 7.8%, Q2 at 6.2%, Q3 at 6.1% and Q4 at 5.9%.

  • System Liquidity and Forex- The average daily absorption under the LAF moderated to Rs 1.4 trillion during February-March. During 2022- 23, money supply (M3) expanded by 9.0% and non-food bank credit rose by 15.4%. India’s foreign exchange reserves were placed at US$ 578.4 billion as on March 31, 2023.

From the above chart, it can be seen that post policy announcement, yield curve exhibits steepening.

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