Statsguru: Inflation to bond yields, key data ahead of MPC meeting

The Reserve Bank of India’s monetary policy committee (MPC) will meet this week to decide whether to further reduce the policy repo rate or not. This will not be an easy decision. While the economy battling with the pandemic shock needs support, inflation continues to remain above the central bank’s target band.

A big challenge is policy transmission as the long-term interest rates in the economy (government bond yields) remain sticky. Chart 1 shows that after successive rate cuts earlier this year, only short-term interest rates have come down. Shorter duration papers have seen bigger corrections in yields.

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