RBI Repo Rate: Loan installment will increase further! RBI is preparing to increase the repo rate again – rbi may increase repo rate in next policy meet emi to go up
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Saugata Bhattacharya, chief economist at Axis Bank, said increasing rates would help bring core inflation under control. He said, “My guess is that the rates can be increased by another 0.25 per cent.” Bhattacharya said that there is a slowdown in growth, apart from this, due to some reduction in inflation, the MPC may cut rates by the end of the third quarter of the financial year 2023-24. It is too early to reverse the RBI’s trend of ‘leaving accommodative stance’, he said, speculating that the central bank may turn its stance to ‘neutral’ in the June review. He said growth is showing signs of moderation, with real gross domestic product (GDP) growth expected to be six per cent in 2023-24, much lower than the Reserve Bank’s estimate of 6.4 per cent.
When will the repo rate be cut
He further said that by the end of the third quarter of 2023-24, when the growth slowdown becomes more evident, inflation comes down to 5-5.50 percent, then the RBI can cut the rates by 0.25 percent. As a result, the key policy rate at the end of 2023-24 will be at 6.50 per cent, the same level as at the beginning of the financial year. Bhattacharya said that there are uncertainties in the entire economic environment at the global level and such a phase has never been seen before in the history of the economy. The good news, however, is that all major economic indicators are improving in the US and Europe.
Banks also require a lot of money for their needs or day-to-day operations. For this, banks take loan from RBI. The rate at which banks pay interest to the Reserve Bank on this loan is called the repo rate. When the bank will get a loan from the Reserve Bank at a lower rate of interest, then the cost of raising their funds will be less. Because of this, they can give cheaper loans to their customers. This means that the lower the repo rate, the lower the interest rates on your home, car or personal loan. If the Reserve Bank increases the repo rate, then banks will have to spend more money to raise money and they will also lend to their customers at a higher rate of interest.
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