RBI announced that the repo rate will remain unchanged at 4% for the 5th consecutive period after the meeting of the Monetary Policy Committee (MPC). The reverse repo rate and marginal standing facility and bank rate also remain unchanged at 3.35% and 4.25% respectively. Prior to this, due to the COVID pandemic, the RBI had cut the key lending rate (repo rate) to 4% after issuing 2 rate cuts of 75 bps in March 2020 and 40 bps in May 2020. RBI did express concern at rising inflation. CPI inflation for Q1 and Q2 of FY22 is projected to be at 5.2% against 5% for Q4 of FY21.
With this the yields on bonds are likely to remain range bound, providing relief to the Debt MF investors as any increase in rates would have impacted them negatively. The unchanged repo rate also brings relief to the real estate sector which has been negatively impacted by the pandemic, the industry has shown signs of recovery following the recent rate cuts.