BRACE UP FOR MORE RATE HIKES

6.5% REPO RATE

Business Today - - THE BUZZ - – Anand Ad­hikari

AF­TER A FOUR-YEAR eas­ing cy­cle, in­ter­est rates are now grad­u­ally in­creas­ing. In just two months, the Re­serve Bank of In­dia (RBI) has hiked the repo rate by 50 ba­sis points to 6.50 per cent on the back of in­fla­tion wor­ries. The big­gest threat is the in­fla­tion out­look show­ing no signs of re­ced­ing be­low the tar­geted 4 per cent CPI. Higher crude oil prices are also play­ing havoc with macros like ris­ing trade deficit, widen­ing cur­rent ac­count deficit, and de­pre­ci­at­ing cur­rency. The re­cent rise in min­i­mum sup­port prices (MSP) and the stag­gered im­pact of HRA will add in­fla­tion­ary pres­sure in the econ­omy. Var­i­ous geo-po­lit­i­cal ten­sions es­pe­cially the trade and cur­rency wars be­tween the United States and China have also raised risks, sig­nif­i­cantly weak­en­ing the value of the In­dian Ru­pee. The sit­u­a­tion is not likely to im­prove any­time soon as farm loan waivers and as­sem­bly elec­tions will also in­crease liq­uid­ity in the sys­tem. So get ready to pay more on your loans.

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