The Reserve Bank of India's (RBI) working paper hints that the central bank may stick with a 4 percent inflation target after the framework is reviewed in March 2021. The working paper co-authored by RBI deputy governor Michael Patra says India’s inflation trend since 2014 has been 4.1-4.3 percent.
B Prasanna, Head-Global Markets Group at ICICI Bank and Suyash Choudhary, Head-Fixed Income at IDFC MF discussed the impact of this on the bond market and the key trends for outlook 2021 in an interview to CNBC-TV18.
Speaking about working paper, Prasanna said, “The uncertainty is removed but it’s not what some of the bond market participants were expecting, but a lot of us also didn’t expect it to change because the RBI, for long, has been looking at 4 percent target from a medium-term perspective.”
Coining similar view, Choudhary said, “I do not think it shifts any material expectations in the market and from that standpoint, the dominant guidance right now is for accommodative monetary policy at least for this financial year and next year probably.”
According to him, most people would look for narrowing of the repo and reverse repo rate.
For entire discussion, watch video