RBI monetary policy hikes repo rates
In the second consecutive review, the Reserve Bank of India (RBI)has increased key interest rates. The third bilateral monetary policy meeting of the current financial year took place three days from July 30. The decisions taken at the meeting were revealed on Wednesday. The RBI has announced that it will increase the key interest rates by a quarter.
At present, the repo rate is 6.25 per cent, and it will increase up 6.50 per cent. The reverse repo rate also increased from 6 per cent to 6.25 per cent. The MSF rate and the bank rate were 6.75 per cent. Some estimate that the key interest rates in this review are likely to remain unchanged. However, the RBI has decided to hike interest rates in the wake of rising oil prices and inflation. This is the second consecutive time that RBI has increased interest rates. Point to be noted that it also increased interest rates in the second biometric review held in June.
Retail inflation is 4.8 per cent
In this review, RBI estimates that retail inflation may be 4.8 per cent in the second quarter of the current financial year. RBI is predicting that food prices will continue to rise as Minimum Support Price increases are expected to increase inflation. Inflation in the July-September quarter is expected to be 4.6 per cent. The retail inflation is expected to rise to 5 per cent by the end of the first quarter of 2019-20.
GDP is 7.4%
The RBI has not made any changes in growth rates for the current financial year. The country’s growth is expected to be 7.4% in 2018-19 fiscal year. In the first three months, the growth rate was 7.5-7.6 per cent, from 7.3 per cent to 7.4 percent in October-March. It is expected to grow by 7.5 per cent in the next financial year.
Bank loan rates in the future are likely to be more burdensome as they raise key rates. If the RBI interest rates increase, public and private sector banks will also raise interest rates on their loans. Housing, automobiles and personal loans interest rates will become hike.