RBI Monetary Policy - Key Takeaways: IDFC Research
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IDFC Research Report
The Monetary Policy was set against a backdrop full of push and pull factors. Some of them were as follows -
1. Resurging domestic growth in context of a global reflation trade leading most boats, including commodity prices, higher.
2. A wider budget deficit that has thrown up unexpected additional bond supply, especially for this year but even for the next. This has fed market anxiety that was already developing since the reintroduction of 14 day variable reverse repo earlier in the year.
As a result government bond yields at the five year point as an example have risen almost 50 basis points since the start of 2021, threatening to unwind a large part of recent transmission just as corporate sector borrowing may be getting ready to pick up.
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