Finance

Inflation will rise: Banks raise fixed deposit rates by 0.50%, all loans will become more expensive

At a time when global inflation is on the rise, the central bank has only one weapon to raise interest rates, the Federal Reserve and the ECB have started raising interest rates while the Reserve Bank of India is still on weight and watch policy. But most of the country’s banks have started raising fixed deposit rates.

Recently, State Bank of India, Bank of Baroda, IndusInd Bank, IDBI Bank and Axis Bank have hiked interest rates on fixed maturities with different maturities by 0.25-0.50 percent. This indicates that the repo-reverse repo rate is likely to increase at today’s Reserve Bank of India monetary policy meeting.

On the one hand, there is news of relief for investors in fixed deposits, on the other hand, it is also certain that all types of loans will become more expensive. Interest rates on home, auto and personal loans will go up depending on how much the RBI raises interest rates.

The retail and wholesale inflation has exceeded the Reserve Bank of India’s forecast, which has made it imperative to balance the gap between the repo rate and the reverse repo rate.

The monetary policy meeting to be held in April is likely to raise the report by 0.25 percent to 4.25 percent. The reverse repo rate is currently 3.35 percent. The Fed has also started raising interest rates by 0.25% as inflation in the US has reached a 40-year high.

Russia Effect: Inflation is unlikely to subside

The Russia-Ukraine war has led to an aggressive rise in global commodity markets. In addition, crude oil has risen by an average of 65-70% in the last month, quoting around 112 dollar. As long as crude stays above 100 dollar, inflation is unlikely to ease. Analysts are currently ruling out a downturn in crude.

Retail inflation higher than RBI calculations

Rising crude oil prices, the sharp rise in prices of metal-steel, cement and other commodities have pushed up prices of all types of essentials, including manufacturing units and the FMCG sector, in the past month. So now there is no escape except raising interest.

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