RBI Credit Policy: Will loans be cheap or expensive? Decision today

RBI Credit Policy: Will loans be cheap or expensive? Decision today

The monetary policy committee "could afford to do a "wait and watch" at this juncture and consider more data points before a rate action", said Lakshmi Iyer, Kotak Mutual Fund's chief investment officer debt.

EMIs on home, auto and two-wheeler loans are set to cost more as the Reserve Bank of India (RBI) on Wednesday raised key lending rates on the back of higher inflationary risks and fears of global volatility such as currency wars. The reverse repo rate was also raised by 25 basis points, to 6.25 percent by the panel headed by RBI governor Urjit Patel.

As per the RBI, the growth would be in the range of 7.5-7.6 per cent in first half of the fiscal and 7.3-7.4 per cent in October-March 2018-19 period "with risks evenly balanced".

Minutes of the Bank's rate meeting signalled there would also be further rises to come as policymakers look to bring inflation back to target, although they continued to stress that these would be "gradual" and "limited".

The bank had last revised its interest rate on May 28, ahead of second bi-monthly monetary policy for 2018-19 announced on June 6.

"The main argument for raising rates now is that it gives the Bank more room for manoeuvre when the next downturn hits".

The report showed its predictions are based on financial market expectations for rates to rise to 1.1% by mid-2021, which would suggest two more quarter-point rises, with the next not until next May.

Community Shield: Sarri's Chelsea value to beat ill-prepared City
I'm going to learn a lot to see him every weekend", said Guardiola ahead of Sunday's traditional curtain-raiser at Wembley. "But Barcelona, for me the best team in the world at playing football, won their first in 1992".

This has now gone down to 0.63%, but it's still higher than it was before the rate increased at the end of 2017. A rise in these interest rates, generally pushes banks to hike their loans and deposit rates, though not always as cost of borrowing from the RBI increases. Economists say that more rate hike could be on the cards this year.

"The impact of the rate hike will be seen with a lag effect, giving the RBI time to decide on the next course of action", he added.

The move sees rates rise above the emergency low of 0.5% for the first time since March 2009 and marks only the second hike since the financial crisis, after last November's quarter-point increase. The rise in the minimum support price of foodgrains will also play its part in keeping the inflationary trend on the higher side. Nearly all (96%) of new mortgage loans are offered on a fixed rate, usually for the first two or five years.

Naveen Kukreja, CEO and Co-founder, Paisabazaar.com: "Home loans will become costlier for fresh borrowers as and when the banks raise their respective MCLRs".

But some economists have questioned whether the BoE was wise to raise rates with uncertainty surrounding the economy.

The pound fell 0.5% against the USA dollar and 0.2% versus the euro, despite the rate rise and unexpected unanimous backing of the MPC for the move.

"The MPC continues to recognise that the economic outlook could be influenced significantly by the response of households, businesses and financial markets to developments related to the process of European Union withdrawal", it said.

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