Repo rate hiked by 0.50%
Money supply can be increased overnight, but not purchasable goods which require considerable time to produce. The 0.5 per cent hike in the repo rate has two broad implications. Vikram Viswanathan, a SEBI-accredited investment advisor, says new borrowers and long-term retail loans linked to the current repo rate will become costlier.
High return on deposit
The interest rate at which banks borrow will now increase, retail loans like personal loans, auto loans, home loans will become costlier. Hence, the EMI of new borrowers is going to increase significantly. Bank depositors, on the other hand, will get higher returns on their deposits, depending on how banks handle the new interest rate hikes. These deposits include fixed deposits.
RBI Governor Shaktikanta Das on Friday said consumer price index (CPI) inflation remains “uncomfortably high” and “expected to remain above 6 per cent”. but kept unchanged. India’s retail inflation eased for the second month in a row, but declined to just 7.01 per cent in June from a year earlier, official data showed on Tuesday. Consumer prices, which rose 7.04 per cent in May, continued to breach the Reserve Bank of India’s upper limit of 6 per cent for the sixth consecutive month.