Mumbai: 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, the repo rate has increased from 4 percent to 5.40 percent.
The Monetary Policy Committee (MPC) may decide to increase the repo rate by 0.50 percent on 30 September. If this happens, the repo rate will increase to 5.90 percent. The repo rate was increased by 0.40 percent in May and by 0.50-0.50 percent in June and August. Retail inflation based on the Consumer Price Index (CPI) started moderating in May but reached 7 percent in August.
The monetary review meeting will be held from 28 to 30 September
RBI takes into account retail inflation while making its biennial monetary policy. The three-day meeting of the Monetary Policy Committee, headed by the RBI Governor, will begin on September 28 and any decision on rate changes will be informed on Friday, September 30. RBI’s job is to ensure that retail inflation remains at 4 percent (up or down 2 percent).
Inflation to remain around 7 percent
Madan Sabnavis, Chief Economist at Bank of Baroda said that inflation is going to remain around 7 percent and in such a situation, there is bound to be an increase in rates. An increase of 0.25 to 0.35 percent in the repo rate 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 percent.
High Inflation Major Cause Of Concern For RBI
Dhruv Agarwal, group chief executive officer, Housing.com, said high inflation is a major cause of concern for the RBI and banks will increase interest rates on home loans as a result of the rate hike. However, we believe that it will not have much impact as the demand for property remains the same, rather the demand is going to increase further during festivals.
