Friday, February 23, 2024

When will RBI reduce loan EMI, know what SBI says?

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RBI Governor Shaktikanta Das

According to a report by SBI Research, the Reserve Bank of India (RBI) may press the pause button on the repo rate in its February monetary policy review meeting. Repo rate is the interest rate at which RBI gives loans to other banks. In its December meeting, RBI had unanimously decided to keep the policy rate at 6.5 percent. According to the Ecowrap report of SBI Research, RBI will not make any change in interest rates even in the February policy meeting. Strong US non-agri payroll data and salaries have dashed market expectations of a quick rate cut. RBI meeting is starting from Tuesday 6th February.

Not likely before June

The report says that the first repo rate cut may happen from June 2024. However, it may get pushed forward till August 2024. The report further said that average core inflation (CPI excluding food and fuel), which was very stable during 2021 and 2022 (6 percent average), has declined sharply to 5 percent in 2023. The research report says that CPI is expected to be around 5.4 percent in fiscal year 2024 and 4.6 percent to 4.8 percent in fiscal year 2025. The MPC chaired by the RBI Governor will begin on February 6 and will continue till February 8. RBI will announce its decisions on 8 February.

There was an increase of 2.50 percent

RBI last increased the repo rate on 23 February 2023. From May 2022 to February 2023, RBI had increased the interest rates from 4 percent to 6.50 percent. RBI did this to stop inflation. In February 2023, RBI had increased the rate by 25 basis points. Since then 5 meetings have taken place. But no change has been seen. If there is no change in interest rates in this meeting too, then this will happen for the 6th consecutive time.

Fed also kept a freeze

In its January meeting, the US Federal Reserve kept the key interest rate frozen for the fourth consecutive time at 5.25-5.50 percent. The US Monetary Policy Committee said in its statement that recent indicators show that economic activity is growing at a solid pace. In the fight against inflation after Covid, the US Fed has increased interest rates from almost zero to now 5.25-5.50 percent. However, earlier the US Fed had said that interest rates would be reduced thrice in the year 2024. Common people expected that the US Fed could start this from January itself.

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