29 Sep 2022
The Reserve Bank of India, in its monetary policy meeting on September 30, 2022, has raised the repo rate by another 50 basis points, and the rate is 5.90% with immediate effect*.
Key things to know
- The monetary policy committee has raised repo rates for the fourth time in a row since April. Repo rates have been raised by a total of 190 basis points since May 2022, when the rate hike cycle began.
- It may continue to remain focused on the withdrawal of accommodation to ensure that inflation remains in its target of 4% for the medium term, within a band of +/- 2%.
- The Indian central bank has lowered the FY23 GDP forecast to 7% from 7.2% earlier.
- It has, though, maintained the inflation target for FY23 at 6.7%.
Central bank view
“The Monetary Policy Committee (“MPC”) is of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, restrain the broadening of price pressures and pre-empt second round effects,” it said in its statement.
Kotak Mahindra Mutual Fund’s views?
A rate hike might be possible in December, but the overall pace of interest rate hikes could recede.
What can investors do?
- The yield curve for Government securities has remained flattish, which enhances the case for investors to own the mid-end of the bond curve for now in the 3-5 year segment.
- A staggering investment approach to fixed income could continue – both from carry perspective initially and potential capital growth subsequently.
- The case for active and passive funds to co-exist, remains.
- Investors may consider investing in target maturity funds, dynamic bond funds, and floating rate funds.
*Source: rbi.org.in, Data as on Sep 30, 2022
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