The RBI increased the repo rate by 25 basis points on February 8, 2023 in an effort to control inflationary pressures in the economy. The Monetary Policy Committee highlighted various risks that may keep inflation elevated, but maintained its projections for the first two quarters of the next fiscal year and updated projections for the rest of the year. The RBI's outlook on inflation, consumption, and growth is optimistic, but core inflation remains a challenge. Experts expect this to be the last repo rate hike of this cycle and a prolonged pause on rates, with a shift in stance to "neutral" in the future. Interest rates appear to have peaked but may take time to go down. Investors should remain invested in short-duration debt funds with maturities up to three years for now. The average yield to maturity of short-duration funds as of December 31, 2022 was 7.59%. Investors should match their investment time frame with the duration of a scheme.

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