Central Bank and the Unholy Trinity: A Practitioner’s Perspective

The monetary policy committee held from Dec 3- 5, 2025 gives a detailed assessment of the evolving macroeconomic and financial developments and accordingly responded with a 25-bps (basis point) cut in the policy repo rates along with announcement of a Buy -Sell swap. The weakening Rupee along with the rising Bond yields had caught attention of the market participants. However, the announcement of the swap measure tenor comes as a surprise. It seems the three market forces (Unholy trinity) of Bond Yield, Weakening Rupee & Worsening Liquidity are testing the Central Bank at the same time. The paper tries to understand the thought behind the various measures and also the implications of these measures across different asset classes.