By – Murthy Nagarajan, Head-Fixed Income, Tata Asset Management
As per RBI MPC members, benign inflation outlook on both headline and core, continues to provide policy space to support the growth momentum. MPC reduced the policy rates by 25 basis points and continue with its neutral stance. The language seems to indicate one more rate cut in the coming months as current year CPI inflation has been revised lower to 2 percent from 2.6 percent and growth for next year and GDP growth has been revised upwards to 7.3 percent from 6.8 percent projected. CPI inflation is projected at 3.9 and 4 percent and GDP growth is projected at 6.7 and 6.8 for Q1 and Q2 of next year 2026-27 . As per RBI Governor, Core inflation pressure is still low given 50 basis points of increase in core inflation is contributed by metal prices.
RBI Governor has announced Open Market Operations of Rs 1 lakh crores with Rs 50000 on December 11 and another Rs 50000 Crores on December 18. Forex buy Sell swap of 5 billion USD is to be done on December 16. A total of Rs 145000 crores of liquidity is expected to be injected in the next 15 days. This is for the month of December only and further measures are expected in the fourth quarter of financial year. This should take the ten-year yields to 6.25 to 6.30 levels in the coming months from the 6.45 to 6.50 prevailing now.