RBI may opt for moderate rate hike on Thursday

Tribune News Service

New Delhi, June 7

The Reserve Bank of India (RBI) chief Shaktikanta Das will announce a second hike in as many months in interest rates at which it lends to banks which would set up a round of increases in equated monthly installments such as home and car loans.

On the flip side, the move is one in a series of initiatives being taken by both the Government and the RBI to control inflation that has hurt household budgets and savings. The rate of inflation has breached the RBI’s upward tolerance band of six per cent and was last recorded at a eight-year high of 7.79 per cent in April. Wholesale price-based inflation has also been in double digits for 13 months and was at a record high of 15.08 per cent in April.

Keeping both these factors in view, the expected rate hike may be moderate and is not going to be 50 basis points as some have been advocating.

The RBI chief has already indicated that there will be another hike in the repo rate. In May, the RBI had held an off-cycle meeting of the MPC to hike interest rates by 40 basis points to 4.40 per cent, the current prevailing rate.

“We expect the RBI to hike interest rates by anywhere between 25-40 bps. The high inflation is largely attributable to the global geo-political environment. The GDP growth of 8.7 per cent in FY22 on the low base, still shows that domestic demand is feeble as higher inflation has dampened the purchasing power. Meanwhile the Government is also managing inflation by reducing tax on petroleum products and restricting the exports of essential commodities,” said Umesh Revankar of Shriram Finance.

About The Author

Tribune News Service

The Tribune News Service brings you the latest news, analysis and insights from the region, India and around the world. Follow the Tribune News Service for a wide-ranging coverage of events as they unfold, with perspective and clarity.

Join Whatsapp Channel of The Tribune for latest updates.