RBI will increase the repo rate again? Experts have these guesses
The Reserve Bank of India (RBI) may hike interest rates for the fourth consecutive time on Friday, following the US Federal Reserve and other global central banks to tackle inflation. RBI has increased the repo rate by 1.40 percent since May to control inflation. During this period, the repo rate has increased from 4 percent to 5.40 percent. The Monetary Policy Committee (MPC) is likely to take a decision on increasing the repo rate by 0.50 per cent on September 30. If this happens, the repo rate will increase to 5.90 percent.
The repo rate was increased by 0.40 per cent in May and by 0.50-0.50 per cent in June and August. Retail inflation based on the Consumer Price Index, which started moderating from May, rose to 7 per cent in August. RBI takes into account retail inflation while formulating its biennial monetary policy. The three-day meeting of the Monetary Policy Committee, headed by the RBI Governor, will begin on Wednesday and a decision on rate changes will be given on Friday, September 30.
Madan Sabnavis, Chief Economist at Bank of Baroda said that inflation is going to remain around 7 per cent and in such a situation, there is bound to be a hike in rates. An increase in the repo rate from 0.25 to 0.35 per cent means that the RBI is confident that the worst of inflation is over. At the same time, keeping in view the recent developments in the foreign exchange market, rates can also be increased by 0.50 per cent. RBI’s job is to ensure that retail inflation remains at 4 per cent (up or down two per cent).
Dhruv Aggarwal, Group CEO, Housing.com, said high inflation is a major cause of concern for the RBI and banks will raise interest rates on housing loans as a result of the rate hike. However, we believe that it will not have much impact as the demand for the property remains. Rather, the demand is going to increase during festivals. State Bank of India had said in its special report that an increase of 0.50 percent is fixed in the rates. It had said the top repo rate would go up to 6.25 per cent and the final hike would be 0.35 per cent in the December policy review.
