RBI likely to go for more interest rate hikes this year: Report
India Today
If the RBI increases the repo rate, banks will likely to hike interest rates against home loans, car loans and others.
The Reserve Bank of India (RBI) will concentrate on interest rate hikes over the coming months in a relatively short tightening cycle, according to a Reuters poll of economists who expect the repo rate to reach its terminal level early next year.
Following a surprise rate rise on May 4, several members of the Monetary Policy Committee (MPC) called for more in upcoming meetings this year to control sticky price pressures, which hit an eight-year high last month.
That sentiment was echoed in a May 26-June 1 Reuters poll that predicted the central bank would raise its key policy rate by at least 100 basis points over the next four MPC meetings.The RBI was expected to follow up its unscheduled 40 basis point repo rate hike in May to 4.40 per cent with another move at the policy meeting on June 8 - a "no-brainer" according to governor Shaktikanta Das.
By how much was unclear as forecasts were split six ways, ranging between 25 and 75 basis points. That is only marginally changed from the seven-way split in a similar poll taken a month ago.
If the RBI increases the repo rate, banks will likely to hike interest rates against home loans, car loans and others. If banks increase interest rates, then equated monthly installments (EMIs) will also go up, impacting borrowers.
However, any move by RBI to hike the repo rate may augur well for depositors who park their money in savings accounts and through fixed deposits (FDs). Banks are likely to offer greater interest to FDs.
In its annual report last week, the RBI pitched for structural reforms for sustained economic growth amid rising inflationary pressure, and asked banks to remain watchful of possible slippages in restructured loans.
