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RBI Policy & Fixed Income Outlook, Oct 17
RBI announced its Fourth Bi-monthly Monetary Policy for the financial year 2017-18.
- In line with market expectations, RBI kept key benchmark rates on hold, maintaining Repo rate at 6%, and reverse repo and MSF at 5.75% and 6.25% respectively.
- 5 out of 6 members voted for status quo on policy rates.
- RBI reduced SLR from 20.0% to 19.50% of NDTL, requiring banks to invest less in Government securities which is slightly negative for bonds
- Yields were up by 5-10 bps as dovishness in tone of RBI was less than what market participants anticipated and reduction in SLR.
- RBI has revised the growth forecast lower (from 7.3% to 6.7% for FY 2018), RBI expects the growth outlook to improve going forward
- RBI has hiked its H2 FY 18 inflation forecast from 3.5 – 4.5% mentioned in the last policy to 4.2 – 4.6% in the current one. This forecast includes impact of central HRA.