Brace Up For More Rate Hikes

After a four-year easing cycle, interest rates are now gradually increasing.

By Anand Adhikari  
Tuesday, August 7, 2018

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.

Anand Adhikari

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