RBI Likely To Hike Rates Again As Inflation Concerns Mount
We are expecting The Reserve Bank of India (RBI) to raise interest rates one more time in the monetary policy meeting that will be coming in April. This is a matter of concern as it reflects concerns over rising inflation.
It has remained above what the RBI usually targets, that is, a range of 4% and a tolerance band of 2% on either side. This is because of several factors, which usually include the huge increase in the prices of global commodities.
Another one includes the supply chain disruptions that keep on happening, as well as the decrease in the value of rupees. All these factors are continuously contributing to the increase in inflationary pressures.
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The impact of raising interest rates is reducing the cost of borrowing, and hence, businesses and individuals borrow less, thus curbing extravagant spending and investment.
The RBI wants to eliminate inflation by accelerating the pace of economic development. This will return inflation to its target range.
Nevertheless, such a choice may also set the scene for a decrease in economic growth since enterprises may refrain from taking additional loans and participating in investments due to the increase in borrowing rates, which may, in turn, result in employment losses and a lower economic pace, in general.
Such deliberation on the RBI’s part may likely give the main attention to taming the rising inflation and fueling the pace of recovery.
Though spearheading the inflation end may even mandate giving inflation control precedence over economic recovery, the central bank will also be careful not to restrict issues that would probably lead to economic deterioration.
The effect of a possible rise in rates will be experienced within different fields, notorious among short-term creditors, for example, SMEs, thereby causing financial strain on their operations. For them, loans towards the purchase of a house, car, or like, too, can witness the difference of increasing interest rates.
Nevertheless, these brass bands may experience varying effects of an interest rate increase; perhaps savers are ones who replenish the balance on fixed deposits or other instruments earning returns.
The increased saving rates could be due to higher returns on savings, which could motivate saving and thereby take some pressure off inflation over time. On the whole, the RBI’s monetary policy decision will be under a lot of watch team by the business community, investors, and the general public, which will make it hard to determine the economic status and personal financial status.
