The Reserve Bank of India’s move of keeping its key policy rates unchanged will result in inching up of yields across the curve as the markets had factored in a 25-50 basis points cut in cash reserve ratio and repo rates.

According to Mr. Akshay Gupta, Managing Director and Chief Executive Officer, Peerless Funds Management Company Ltd, the impact will be more pronounced on short-term yields.

“By not cutting rates in this policy at all, the RBI is keeping its arsenal ready for the July policy. Till inflation stays below six per cent for some period of time, we do not expect any major policy action from the central bank,” he said.

According to him, the worsening fiscal situation was responsible for crowding out investment and mere monetary policy measures could not help address the issue.

“The growth-inflation conundrum has reached a stage, where only swift well-rounded action from all stakeholders can alleviate matters. Policy action on reduction of subsidies, flow of FDI and FII, reduction in current account deficit and addressing supply side measures will trigger dovish RBI policy,” he pointed out.

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