Your loan EMI will not increase in the midst of skyrocketing inflation, know what is RBI's preparation

Your loan EMI will not increase in the midst of skyrocketing inflation, know what is RBI’s preparation


new Delhi. In view of the Russia-Ukraine crisis amid skyrocketing inflation, RBI will not increase policy interest rates for the time being. Interest rates will remain stable. This will not only provide some relief on the inflation front, but will not increase the EMI of any of your loans.

Economists say that RBI can start tightening monetary policy only at the end of this year. The geopolitical situation has changed since the last meeting of the Monetary Policy Committee (MPC) held in early February, but the RBI will not make any immediate changes in rates. Russia’s attack on Ukraine last week has caused turmoil in global and domestic markets. Brent crude has crossed $ 100 per barrel, due to which the fear of inflation has increased.

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Other central banks have increased rates
The RBI did not change policy rates in its February meeting, while other central banks around the world have increased rates to combat inflation after the pandemic. Unlike other central banks, the reason why RBI did not raise rates is that India’s inflationary character is slightly different from other economies. However, RBI Governor Shaktikanta Das had said in the MPC meeting that inflation is expected to moderate in the next financial year.

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EMI burden may increase from August
Economists at Barclays say that the RBI may choose to normalize the policy in the next six months. It is expected that the hike in the repo rate will start from the August meeting. There is a possibility of further delay. Economists at Emkay Global Financial Services claim that policy makers may not react quickly through interest rates. Tougher policy signals and generally sluggish minutes at the MPC meeting mean that the RBI will be slow on policy changes. We maintain our view that the RBI has some policy flexibility in its hands, which may delay the hike in the repo rate.

Effect of supply on domestic inflation
RBI believes that supply constraints are affecting domestic inflation. Inflation will come down only after getting relief from this. In the February meeting, Das had said that inflationary pressure in India is largely due to supply-side. At the same time, Deputy Governor Michael Patra had said that the inflation of the epidemic is not driven by high demand but by supply constraints. Economists believe that India meets 85 percent of its oil demand through imports. The rise in crude oil prices will add to the inflationary pressure.

Tags: inflation, RBI, Rbi policy


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