Bond yields rose sharply Wednesday after the Urijit Patel-led committee outlined a clear focus on inflation control for the Reserve Bank of India in its report on monetary policy framework released Tuesday.
The panel, headed by the central bank deputy governor Dr Urijit Patel, suggested the RBI should adopt a formal inflation target (at 4 percent retail prices +/- 2 percent), which should then become the anchor for setting monetary policy.
The report added that the RBI should aim to bring down the consumer price index from 9.87 percent currently to 8 percent in a year and 6 percent in two.
Also read: Bring CPI inflation to 6% in 24 mnths: Urjit Patel panel
Bond prices – which move in the opposite direction to yields -- fell the most in two months on the perception that the recommendations clearly imply a hawkish monetary policy tone in the future.
Yield on the 10-year benchmark government bond rose 10 basis points to 8.65 percent in early Mumbai trading, even as the RBI was scheduled to buy bonds in an open market operation ahead. Bonds have enjoyed a substantial rally in the past few months, with yields on the 10-year falling from a peak of about 9 percent in November to about 8.5 percent recently, fueled by falling inflation and a pause in the rate-hike cycle. Read more..
The panel, headed by the central bank deputy governor Dr Urijit Patel, suggested the RBI should adopt a formal inflation target (at 4 percent retail prices +/- 2 percent), which should then become the anchor for setting monetary policy.
The report added that the RBI should aim to bring down the consumer price index from 9.87 percent currently to 8 percent in a year and 6 percent in two.
Also read: Bring CPI inflation to 6% in 24 mnths: Urjit Patel panel
Bond prices – which move in the opposite direction to yields -- fell the most in two months on the perception that the recommendations clearly imply a hawkish monetary policy tone in the future.
Yield on the 10-year benchmark government bond rose 10 basis points to 8.65 percent in early Mumbai trading, even as the RBI was scheduled to buy bonds in an open market operation ahead. Bonds have enjoyed a substantial rally in the past few months, with yields on the 10-year falling from a peak of about 9 percent in November to about 8.5 percent recently, fueled by falling inflation and a pause in the rate-hike cycle. Read more..
Source: Business News in Hindi
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