ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Inverted Yield Curve

The recent behaviour of interest rates and the yield curve is a reflection of the monetary policy stance that has succumbed to market expectations. The monetary policy actions have naturally had an impact on shortterm interest rates, the upward revisions in benchmark rates leading to a rise in the former; but the long-term rates are restrained by what the market can bear. Hence, in a situation of sluggish economic activity, long-term rates rise in sympathy with short-term rates but only fractionally; this leads to narrowing of the spread and flattening of the yield curve, even at times leading to an inversion.

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