Interest Rate Changes and Duration Management
| Case Code: FINC177 Case Length: 13 Pages Period: 2010-2020 Pub Date: 2021 Teaching Note: Available |
Price: Rs.400 Organization: - Industry: Wealth Management Countries: India Themes: Portfolio Management, Fund Management, Risk Management, Investment Decisions |
Abstract Case Intro 1 Case Intro 2 Excerpts
Changing Interest Rate and Bond Market Performance in India
Making changes in the benchmark interest rates was a very effective monetary tool available to any central bank like the RBI. The RBI changed interest rates to make a trade-off between inflation on the one side and economic growth on the other. When inflation was spiralling up, the RBI tightened the monetary policy by increasing interest rates. This reduced money supply and combated inflation but, on the other side, the higher cost of borrowing impaired economic growth. When inflation had been brought under control, the RBI followed a liberal credit policy by cutting interest rates, which stimulated economic growth..
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