The Monetary Policy for Dec’25 fulfilled the aspirations of the market by delivering a 25bps rate cut. A liquidity boost using OMO and forex swaps was also promised in Dec’25, with more likely in the coming months. These moves are presaged on the low inflation expected in FY26. Currency depreciation was downplayed, and growth was considered to be good. The Report analyses the outlook for inflation beyond FY26 and outlines some risks. It also comments on the impact of the policy moves on G-sec yields and spreads, with an elucidation of the possible impact on the yield curve. It concludes with an outlook on the rate and yield trajectory.
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