RBI credit policy: What is expected and what will be the aftermath if there is an hike?


With the increasing oil prices and inflated consumer prices, the RBI is expected to increase the interest rates today at its third bi-monthly meet this year.

At its earlier meeting, RBI had hiked the rate by 0.25 percent to 6.25 percent. Amidst the stashed GST rates and increasing oil prices, a hike by RBI is seen as an imperative move. Let’s see what RBI Monetary Policy Committee (MPC) says today.

Research experts are expecting a 25 bps hike in the interest rate which may lead to a consolidated range of about 7.65-7.80 percent. Going by the recently announced MSP hikes, the government is bound to be increasing the interest rates and it is considered as a positive move to handle the fiscal pressure.

The last time, although RBI had increased the rate for the first time in the last four years, it had maintained a neutral stance. It said the rate hike next time will only be fuelled by the data. Some expect that there will be no change in the rate hike, while others believe that a rate hike is crucial. What is eagerly awaited now is the MPC commentary which is expected to start at 1430 hours today.

Another factor which is likely to affect their decision is the dollar-rupee index. Apart from that, the procession of the monsoon, the trade war sentiments are some factors which can affect the rate. For the third day in trade, the Sensex has been closing in green and making an uptrend, breaching past highs, etc. The MPC decision will also affect the stock market and its scripts. Bank Nifty, Housing Finance Corporations and Housing Development Organisations.

The Indian market is booming and growing at an unprecedented pace, and this given, a slight interest rate looks like a good option for the economy. There is also news of stunted liquidity in the market and RBI is perhaps taking steps to mitigate the nuisance.