New Delhi: The Reserve Bank of India's foreign-currency mobilisation has temporarily eased financial conditions and given the central bank more room to hold off on rate hikes, but the effect could prove short-lived as inflation, global interest rates and rupee weakness pose renewed risks, according to a research report by Systematix.
The domestic brokerage firm said FCNR(B) inflows have steepened the yield curve, pulling the five-year government bond yield down to around 6.47, while the 10-year yield has remained firmer at about 6.85 per cent. The easier financial conditions have reduced the immediate need for monetary tightening, although Systematix expects this calm to be fragile.
