Tag: Monetary Policy Committee (MPC)

RBI Monetary Policy 2024: Interest rates unchanged for the seventh time in a row

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) has left its key lending rate (repo rate) unchanged at 6.5%, in line with market watchers’ and economists’ expectations. This was the seventh straight instance of the policy rates left unchanged by India’s central bank.

A CNBC-TV18 poll had expected the RBI MPC to maintain a status quo.

The decision to keep the rates unchanged was taken with a 5:1 majority. The RBI MPC decided by a 5:1 majority to remain focused on “withdrawal of accommodation”.

The RBI MPC also left the Marginal Standing Facility (MSF) and Standing Deposit Facility (SDF) rates unchanged at 6.75% and 6.25%, respectively.

Speaking to CNBC-TV18’s Shereen Bhan on the sidelines of the World Economic Forum (WEF) 2024 at Davos in January this year, governor Shaktikanta Das had quashed hopes of an early rate cut. The governor had explained that price stability is the bedrock for sustainable growth, and a premature pivot in policy can prove costly for the economy.

The RBI has maintained India’s fiscal year 2025 GDP growth target at 7%. The governor mentioned that the impact of above-normal temperatures warrants monitoring.

The governor during his speech highlighted that while inflation is moving closer to target, the last mile of inflation is turning out to be challenging. As a result, the central bank has left the Consumer Price Inflation (CPI) forecast unchanged at 4.5%.

“Two years ago around this time, when CPI inflation peaked at 7.8% in April 2022, the Elephant in the room was inflation, the elephant has gone out for a walk and appears to be returning to the forest. We would like the elephant to return to the forest and remain there on a durable basis,” the central bank Governor said.

“The policy is broadly on expected lines. Things I would like to borrow from the governor’s speech is that liquidity management is nimble and flexible. I think we could witness in the last few weeks that the liquidity is not constrained in the system. Whenever liquidity is excess, absorption was done and when the shortfall was noticed, injection was done. What the governor has assured us in terms of being nimble and flexible is reassuring,” SBI Managing Director CS Setty said.

The RBI governor also warned that the government risks in advanced economies could erupt abruptly and that emerging economies with rising debt could be vulnerable.

Catch the live updates on RBI MPC here.

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Will RBI stun with a policy pivot?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Why should we know what the Reserve Bank of India (RBI) says and does tomorrow at the monetary policy? For one thing, it will determine whether the high fixed deposit (FD) rates we are getting from banks will continue or whether rates have peaked. For businessmen, this policy can decide whether their cost of capital will fall and when.

So, what has changed since the December 2023 policy that can make the RBI dovish or hawkish?

The changes have been mostly dovish.

First, consumer price index (CPI) inflation for November and December has come in lower than the market and the RBI’s forecasts. RBI had forecast the October-November-December CPI at 5.6%; the quarterly CPI actually came in at 5.37%.

Even better, core inflation fell in December to 3.8%. Core inflation, which excludes the two volatile elements—food and fuel—fell to 3.8% from 5% in early 2023 and 6% in 2022. The core is stickier, and RBI considers getting the core CPI to 4% as its primary goal since it has less control over fuel and food. So, a core CPI coming below 4% can impact RBI policy seminally.

Secondly, the government has tightened the fisc more than expected. The fiscal deficit for the current year has been brought down to 5.8% from 5.9% budgeted earlier, while the next year’s deficit is budgeted at 5.1% against widespread expectations of a 5.2–5.5% deficit. All reductions in deficit contract demand and are disinflationary.

Thirdly, the RBI appears to have voluntarily wanted call rates lower. On January 25, it did a variable repo auction to put in ₹2.5 trillion into the banking system. The call rate is the rate at which banks borrow from one another for one day. The RBI is mandated to keep the call rate at the repo rate fixed by the MPC, which is currently at 6.5%. But the call rate had been at 6.75% for almost five months, i.e., since August last year.

Although the RBI tightened liquidity with an incremental CRR (cash reserve ratio) hike on the pretext of squeezing out liquidity brought in by the return of ₹2000 currency notes, the higher call rate was clearly a stealth rate hike intended to cool inflation, which was running at 7–7.8% in July and August. The RBI voluntarily infusing liquidity and allowing the call rate to fall back to 6.5% this month is being perceived as the RBI’s dovishness.

So, what may change in the policy? The rates are definitely not changing in this policy or for some months now. All eyes are on the RBI’s stance, which stands at “removal of accommodation.” The argument is that if the RBI is providing liquidity of ₹2.5 trillion, surely that sounds like providing accommodation. In that case, it can’t persist with “removal of accommodation” as a stance. On this argument, a few economists maintain small odds that the RBI may change its stance.

But a majority are not convinced that the RBI will go to the extent of changing its stance to indicate dovishness. Most dealers and economists believe the tone, the talk and the stance are likely to be exactly as they were in December. RBI may still be concerned about food inflation, with some veggies, eggs and pulses spurting. The strong growth numbers also raise worries of demand push at a later date. The growth numbers certainly raise the question: why turn dovish when the economy is anyways robust? Also, the cues from the US Federal Reserve do not indicate an imminent rate cut. All this may keep the RBI totally neutral.

However, it may well prepare the markets for a change in stance in the next policy. The RBI may slightly lower its inflation forecast to indicate its comfort with the trajectory. It may also, in some way, admit that the need for very tight liquidity is over. But the RBI may be equally careful not to encourage a rise in risky assets or more aggressive lending by banks.

The base case, therefore, is that the RBI will keep the policy status quo and boring. Bankers, economists and the media, of course, will look for the odd dovish slip-up.

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RBI policy highlights: Both interest rates and policy stance unchanged

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India did not hike its lending rate (repo rate), in line with the consensus expectations of market watchers and economists.

The repo rate was left unchanged at 6.5%, as announced in the October policy. A CNBC-TV18 poll had also expected the Monetary Policy Committee to maintain a status quo.

Decision to take keep the rates unchanged was taken unanimously. The Monetary Policy Committee also decided by a 5:1 majority to remain focused on “withdrawal of accommodation.”

This essentially means that the central bank will continue with its efforts to tame inflation with interest rate hikes, if needed. The RBI expects inflation to remain higher than its comfort level through this financial year ending March 2024.

The long-awaited normalcy awaited by the global economy still remains elusive, the Governor said as he began his speech. The global economy is showing signs of slowdown although in specific geographies and specific sectors.

India’s central bank decided to increase the country’s GDP growth estimates for financial year 2024 to 7% from the earlier estimate of 6.5%. Estimates for the final two quarters of financial year 2024 were also revised higher.

RBI Deputy Governor Michael Patra told reporters that the GDP data collected for the months of October and November is very robust and that the financial year 2024 revised GDP target of 7% is a conservative estimate.

On the other hand, inflation projections for the current financial year were left unchanged at 5.4%, as were the projections for the remaining two quarters.

The Governor also disclosed inflation projections for the September and December quarters of financial year 2025 at 4% and 4.7% respectively.

“This is slightly higher than what we were expecting. But I think we will have to wait and watch. We will have to see how the high frequency data in the next quarter also pans out. For us to have a much more firmer call for the fourth quarter. Third quarter clearly looks to be doing good,” said Upasna Bharadwaj, Senior Economist at Kotak Mahindra Bank.

Marginal Standing Facility (MSF) and Standard Deposit Facility (SDF) rates have been left unchanged at 6.75% and 6.25% respectively.

The Governor noted that there has been a higher utilisation of both MSF and SDF facility by the banks and in order to address the situation, the central bank has proposed to allow reversal of liquidity facilities in both SDF as well as MSF during weekends and holidays with effect from December 30, 2023.

“The measures announced by the governor are extremely positive in terms of making the reversal of liquidity facilities both weekends and holidays – this long-standing demand from the industry, we are glad that it has been implemented though it will be reviewed after six months, it definitely eases the liquidity management at the bank,” SBI MD CS Setty told CNBC-TV18.

The RBI has also decided to come out with a unified regulatory framework on connected lending for all regulated entities.

Additionally, in some of the other decisions taken by the RBI, the UPI payment limit for hospitals and education payments has been revised higher to ₹5 lakh per transaction from the earlier limit for ₹1 lakh per transaction.

“From being a part of fragile 5 some time back to having GDP growth revised upwards to 7% when global growth has become fragile is the summary of the good work done by the RBI and the government in the most challenging times,” said Nilesh Shah of Kotak Mahindra AMC.

In an address to reporters, the Governor said that it will be wrong to assume that any kind of loosening is around the corner and it will also be wrong to assume that the MPC is moving towards a “neutral” stance.

“For now, we continue to expect the RBI to start its rate cut cycle not before the June/August policy in 2024,” Abheek Barua of HDFC Bank was quoted as saying.

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RBI MPC member Jayanth Varma says reduction in repo rate will only occur when inflation subsides to 4% target

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) has published the minutes of its monetary policy meeting held on October 6. A prevailing concern among RBI members is the potential impact of recurrent food and fuel price shocks on inflation expectations. As a result, they emphasise that monetary policy should prioritise the ongoing disinflation process until the 4% inflation target is achieved.

Jayanth R Varma, an External Member of the Monetary Policy Committee (MPC), in an interview to CNBC-TV18 stated that a reduction in the repo rate will only occur when inflation subsides. He stressed that a few quarters of inflation below 6% would not suffice as a reason for a rate cut. Varma reiterated that the RBI’s inflation target is set at 4%, not below 6%.

“Our inflation target is 4% and not below 6%. We have to keep real interest rates high enough to drive inflation down to 4%. The repo rate will come down if inflation comes down. For couple of quarters where inflation is below 6% is not a reason for a cut,” Varma said.

During the October 6th monetary policy meeting, the RBI decided not to increase its lending rate (repo rate), aligning with the consensus expectations of market analysts and economists. The repo rate remains unchanged at 6.5%, consistent with the August policy announcement.

Another external MPC member, Shashanka Bhide, concurred with Varma’s perspective, highlighting the need for sustained decrease in inflation rate for any interest rate cut, given the potential impact of a weak monsoon on agricultural and food prices.

“We have had shocks coming externally and also the weather related supply disruptions over the past few months, but concern is also that it should not get generalised into the prices. The shocks that we saw in July and August seem to be transitory but there is this potential for continued effect of weak monsoon this year on agricultural prices, food prices and so on. So it is important that we see the inflation rates going down in a sustained manner for interest rates to be cut,” Bhide said.

India experienced “below-average” cumulative rainfall during the four-month monsoon season from June to September, with a recorded measurement of 820 mm, deviating from the long-period average (LPA) of 868.6 mm. This deviation was attributed to strengthening El Niño conditions. In the four years leading up to 2023, India had witnessed “normal” and “above-normal” rainfall during the monsoon season.

Contrarily, MPC external member Ashima Goyal argued that India historically did not witness generalised inflation despite multiple supply-side shocks. Therefore, she sees no reason to believe that external shocks will lead to generalised inflation in the future.

“In the past India has seen multiple supply shocks but inflation has not generalised in Indian conditions because we have softness of demand, we don’t have a tight labour market, we don’t have excessive fiscal spending. So far we have seen that core inflation has not generalised due to the recurrent supply side shocks. So why should we think that it will generalise in future? I think inflation targeting is working, expectations are getting anchored. I think in India we are getting used to 4% inflation now,” Goyal said.

Watch accompanying video for entire discussion.

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RBI Monetary Policy | Markets will watch for any hawkish phrases and upward revision in inflation forecast

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India’s Monetary Policy Committee (MPC) is holding a three-day meeting at a time when the nation is grappling with contrasting economic indicators. Market participants are eagerly awaiting the committee’s decision, with a unanimous ‘status quo’ expectation dominating the sentiment.

Citizens MPC predicts that the RBI MPC is likely to have a neutral to hawkish stance in August policy with a focus on tomato inflation and global macro uncertainties.

Meanwhile as per a CNBC-TV18 poll, despite the ongoing turmoil in global economic waters, there is an air of cautious optimism surrounding the Indian economy. The recent surge in vegetable prices, a matter of concern for households across the country, has been accompanied by a moderation in fuel and core inflation. The anticipation among market experts is palpable, with every respondent in the CNBC-TV18 poll predicting that the RBI’s MPC will opt to prolong the ongoing policy pause, keeping the repo rates untouched at 6.5 percent.

So at this expectation, what do the experts think will move the market?

Abhishek Upadhyay, Senior Economist, ICICI Securities PD, told CNBC-TV18 that the focus will be on what the Reserve Bank of India (RBI) says about H2 inflation.

“In July, we expect a 6.8 percent kind of inflation, and inflation for July-September is tracking above 6 percent. But from a Monetary Policy standpoint, I believe they will be focused on what the Reserve Bank of India (RBI) says about H2 inflation and also on what projection they give for April-June 2024 inflation which will be put out in the Monetary Policy document this time,” he said.

He further added that RBI might revise overall inflation by 20-30 basis points to 5.5 percent in H2

“Possible that for H2, the RBI revises forecast by 20-30 basis points higher towards 5.5 percent or so. And for April-June again, maybe they give a number between 4.5 percent and 5 percent. But no material change. These numbers would signal and provide a cue to bond markets that RBI is likely to be on prolonged pause rather than leaning towards a hike, which is what is priced into the swap curve currently, which was indicating an opportunity for a hike by the December policy, which we still consider to be quite a low-probability event,” he said.

R Sivakumar, Head-Fixed Income, Axis AMC, said that markets will wait for the next few months before that kind of a movement on yields happens.

“If you look at the global environment for yields, it’s definitely on your side. The underlying worry is that central banks are not done tightening — the move in Japan to lose yield curve controls again has pushed yield expectations higher. So in the very near term, even if RBI holds its policy rates and stance, I don’t think we should see a significant move in yields. I think markets will wait for the next few months before that kind of a movement happens,” he said.

RBI’s growth outlook will also be an important factor to watch out for. “I think a lot of the reasons that RBI has maintained the monetary policy stance the way it has over the last few years is to ensure that growth is supported. So, because of the global environment, we saw the trade data out of China, and we’ve seen some incremental numbers in the US indicating some kind of slowdown, I think in the second half of the year, we should expect RBI to tone down its language. It’s too soon for tomorrow, but it’s certainly something that you should be watching for in the next year,” said Sivakumar.

Further, he mentioned that if RBI changes its statements on liquidity then that will also be something that the market will watch out for.

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Monetary Policy: RBI lowers FY23 GDP growth forecast to 6.8% from 7% earlier

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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“Earlier we had projected 7 percent real GDP growth for FY23 even after this revision for growth projection India will still be among the fastest growing major economies in the world,” said Das. 

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‘Our umbrella strong but inflation a worry’: Key highlights of RBI monetary policy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced that the central bank’s Monetary Policy Committee (MPC) raised the repo rate by 50 basis points to 5.40 percent in its bi-monthly policy meeting. A repo rate is the rate at which the central bank of a country lends money to commercial banks.

This is the third consecutive rate hike by the RBI. The RBI’s decision is a response to a spike in inflation that has forced major central banks around the world to raise rates.

The RBI maintained its retail inflation forecast at 6.7 percent while it has retained the GDP growth forecast at 7.2 percent for this year.

With strong and resilient fundamentals, India is expected to be the fastest growing economy in FY23, said Das.

However, he added that sustained high inflation could destabilise expectations and harm growth in the medium term.

Also Read: RBI hikes repo rate by 50 basis points for second time in a row to tackle inflation

Here are the key highlights:

• The MPC unanimously voted to hike the repo rate by 50 bps to 5.40 percent and keep the stance unchanged.
• Focus remains on withdrawal of ‘accommodation’ to ensure that inflation remains within the target going forward, while supporting growth.
• Domestic economic activity resilient, progressing broadly along the lines of the June MPC resolution.
• Consumer price inflation eased from its surge in April but remains uncomfortably high.
• Volatility in global financial markets is impinging upon domestic financial markets.

Inflation Forecast

• CPI Inflation projection for FY23 retained at 6.7 percent
• Q2 CPI seen at 7.1 percent vs the earlier 7.4 percent
• Q3 CPI seen at 6.4 percent vs the earlier 6.2 percent
• Q4 CPI projection retained at 5.8 percent
• Q1 FY24 CPI seen at 5 percent
• Incipient signs of factors that could lead to further softening of domestic inflationary pressures
• There remain significant uncertainties with respect to inflation

Also Read: RBI retains retail inflation forecast at 6.7% for FY23

Growth Forecast

• Real GDP growth forecast for FY23 retained at 7.2 percent
• Q1 FY23 GDP growth forecast retained at 16.2 percent
• Q2 FY23 forecast retained at 6.2 percent
• Q3 FY23 forecast retained at 4.1 percent
• Q4 FY23 forecast retained at 4 percent
• Q1FY24 GDP growth seen at 6.7 percent
• Domestic economic activity remains resilient
• Rural demand indicators exhibited mixed signals
• Capacity utilisation in manufacturing sector now above its long-run average, signaling need for fresh investment activity in additional capacity creation
• Increase in capacity utilisation, govt’s capex push, large expansion in bank credit should support investment activity

Also Read: GDP growth projection for 2022-23 is retained at 7.2%: RBI Guv Shaktikanta Das

Liquidity

• Surplus liquidity has come down to Rs 3.8 lakh crore during June-July from Rs 6.7 lakh crore during April-May
• RBI will remain vigilant on liquidity front, conduct two-way fine-tuning operations as warranted (VRR and VRRR)

Also Read: SBI, ICICI Bank, Tata Motors rise but HDFC, SBI Cards, Maruti fall after RBI’s 50-bps hike

On Rupee

• The governor said that the rupee has moved in a relatively orderly fashion depreciating by 4.7 percent in FY23 against dollar, faring much better than several reserve currencies and EME and Asian peers
• Depreciation of the rupee is more on account of the appreciation of the US dollar rather than weakness in macro fundamentals of Indian economy
• Market interventions by RBI have helped in containing volatility
• RBI has ensured orderly movement of the rupee
• RBI will remain watchful and focused on maintaining stability of rupee

Catch LIVE updates on RBI policy here

Additional Measures 

• Master Direction on Managing Risks in Outsourcing of Financial Services.
  To issue draft RBI (Managing Risks and Code of Conduct in Outsourcing of Financial Services) Directions, 2022, for public comments shortly
• Inclusion of Credit Information Companies (CICs) under RBI’s Integrated Ombudsman Scheme
• Standalone Primary Dealers (SPDs): Proposed to enable SPDs to offer all foreign exchange market-making facilities as currently permitted to Category-I Authorised Dealers. Permitting SPDs to deal in offshore Foreign Currency Settled Overnight Indexed Swap Market
• Committee on MIBOR Benchmark: To set up a committee to undertake an in-depth examination of issues, including need for transition to an alternate benchmark
• Enabling Bharat Bill Payment System (BBPS) to process cross-border inbound bill payments

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RBI allows linking of UPI with credit cards and RuPay customers will benefit first

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday that the linking of the Unified Payment Interface (UPI) with credit cards would be allowed soon, and those with RuPay credit cards would get the benefit first.

During the June Monetary Policy Committee (MPC) meeting, Das said this would increase convenience for users and enhance the scope of digital payments. Currently, users can make UPI payments only by linking savings or current accounts through debit cards.

The RBI governor said on Wednesday that UPI had become the most inclusive mode of payment in India. “Currently, over 26 crore unique users and 5 crore merchants are on the UPI platform. In May 2022 alone, 594.63 crore transactions amounting to Rs 10.40 lakh crore were processed through UPI,” he said.

ALSO READ | Shaktikanta Das announces 50 bps hike in repo rate, says focus on withdrawal of accommodation

“To further deepen the reach and usage, it is proposed to allow linking of credit cards to UPI. To start with, RuPay credit cards will be enabled with this facility,” he said.

The RBI governor said this facility would be available after the required system development is complete. “Necessary instructions will be issued to the National Payments Corporation of India (NPCI) separately,” Das said.

As per a note from Equirus, those on Visa or Mastercard networks were already making payments through Google Pay but only to merchants. The note said that one could use their credit or debit card via GPay at tap-and-pay NFC-enabled terminals, for Bharat QR code-based payments, bill payments, recharges, and online payments on Myntra, Dunzo, Yatra, MagicPin, Coolwinks, EaseMyTrip, and Confirmtkt android apps.

It is not clear yet if UPI payments from person to person through credit cards would be made possible after the RBI decision. According to some reports, if this is made possible, credit card companies might have issues charging a merchant discount rate (MDR). The Equirus note states: “In credit card payments made over UPI, MDR continues to get charged as per card variant.”

ALSO READ | RBI retains India’s growth projection at 7.2% with first-quarter expectation at 16.2%

On e-mandate

The RBI governor also said that the cap on e-mandate for card recurring payments would be hiked from Rs 5,000 to  Rs 15,000 per recurring payment.

Shaktikanta Das said the RBI was getting requests from stakeholders to increase the limit under the framework to facilitate payments of larger value like subscriptions, insurance premia, education fees, etc.

ALSO READ | RBI interest rate hike wipes out the gains in M&M shares today

“Major banks are providing the facility, and the transaction volumes are seeing good traction. To date, over 6.25 crore mandates have been registered under this framework, including for over 3,400 international merchants. Requests have been received from stakeholders to increase the limit,” he said.

“To further augment customer convenience and leverage the benefits available under the framework, it is proposed to enhance the limit from Rs 5,000 to  Rs 15,000 per recurring payment. Necessary instructions will be issued shortly,” he said.

ALSO READ | RBL Bank revises FD interest rates: Check details here

S K Ghosh, Group Chief Economic Advisor to SBI, said, “MSP hike for the Kharif crops, there will be an upside pressure of 15 to 20 bps on inflation.”

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Several global storms hitting at once prompted RBI to hike key interest rate: Monetary Policy Committee minutes

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Several global storms hitting together prompted the Reserve Bank of India to hike the key interest rate in an off-cycle review by the Monetary Policy Committee (MPC), said the minutes of the rate-setting panel that were released on Wednesday.

According to the minutes, RBI Governor Shaktikanta Das said the off-cycle monetary policy actions were aimed at lowering inflation and anchoring inflation expectations with a view to strengthening the medium-term growth prospects of the economy and protecting the purchasing power of the weaker sections of society.

After its meeting on May 2 and 4, the MPC had recommended raising the key interest rate (repo) by 40 basis points. The rate was hiked with immediate effect. It was the first hike since August 2018. “As several storms hit together, our monetary policy response should be seen as an important step to steady the ship. The Indian as well as global evidence clearly shows that high inflation persistence hurts savings, investment, competitiveness and growth,” the governor had said, as per the minutes.

Also Read: Low, stable inflation critical for spurring growth: RBI

RBI Deputy Governor and MPC member Michael Debabrata Patra said at the meeting that in this milieu, a measured approach and a cool head is warranted. “Recent incoming data suggest that India’s macro-fundamentals, barring imported food and fuel inflation, are still intact and in sync with the recovery that has been tenaciously making its way through waves of the pandemic,” he said.

All the six members of the panel had voted to raise the repo rate or short-term lending rate by 40 basis points to 4.4 percent.

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10-year bond yield hits 7% as RBI announces monetary policy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The yield on the 10-year government bond crossed 7 percent as the Reserve Bank of India (RBI) raised the held-to-maturity (HTM) limit to 23 percent.

The 10-year bond yield had already inched nearly 7 percent before the policy meet. The 10-year benchmark government bond yield rose by 1.37 percent on April 8 during the RBI announcement after 10 am. It was up by around 1.98 percent at 1 pm.

The 10-year bond yield had closed at 6.91 percent on April 7, 6.92 percent on April 6, and nearly 6.90 percent on April 5.

“To enable the banks to better manage their investment portfolio during 2022-23, it has been decided to enhance the present limit under the HTM category from 22 percent to 23 percent of NDTL (net demand and time liabilities) till March 31, 2023,” RBI Governor Shaktikanta Das said.

“It has also been decided to allow banks to include eligible SLR (Statutory Liquidity Ratio) securities acquired between April 1, 2022, and March 31, 2023, under this enhanced limit. The HTM limits would be restored from 23 percent to 19.5 percent in a phased manner starting from the quarter ending June 30, 2023,” he said.

Bond yields have hardened for most emerging market economies (EMEs) from mid-February, with a notable spike in Russia, followed by some softening in the second half of March. Bond yields across major advanced economies (AEs) broadly rose in Q4:2021, as investors grappled with protracted inflation risks and withdrawal of monetary accommodation by major central banks

The US 10-year bond yield raced up above 2.0 percent in early February before retreating on safe-haven demand. With the tightening cycle commencing, the 10-year bond yield moved up from mid-March, hitting a 3-year high of 2.5 percent in the last week of the month.

According to an RBI report, the US long-term yields impact other countries through various channels, with consequent portfolio rebalancing and capital outflows putting pressure on emerging market exchange rates and bond prices.

The Russia-Ukraine war and the rising fuel prices prompted the six-member Monetary Policy Committee (MPC) to increase the inflation forecast for the current fiscal year and lower its estimates for real Gross Domestic Product (GDP) growth for FY23 GDP to 7.2 percent from 7.8 percent.

“The RBI projects CPI (Consumer Price Index) inflation at 5.7 percent for FY23, as against 4.5 percent projected earlier,” Das said.

The RBI now sees GDP growth at 16.2 percent in Q1 as against 17.2 percent earlier, and at 6.2 percent in Q2 as against 7 percent earlier. For Q3, the central bank now projects GDP expansion at 4.1 percent as against 4.3 percent earlier, and 4 percent for Q4 as against 4.5 percent earlier.

Shaktikanta Das said the RBI assumed the crude rate at $100 per barrel to estimate CPI and growth. He feels crude oil prices would remain elevated for some time.

The bond yields were anchored amid global volatility as they had been given a reprieve from government debt supply for February and March. The government’s borrowing programme for FY22 came to an end on February 25, and for that month supply of bonds hitting the market was lower than expected because of cancelled auctions.

The MPC voted unanimously to keep the repo rate unchanged at 4 percent and remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth.

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow