Common borrowers may get relief for the time being in the monetary policy meeting of the Reserve Bank of India to be held in June, because most economists do not expect an immediate increase in interest rates. However, due to rising inflation, expensive crude oil and weak rupee, the risk of EMI becoming expensive by the end of the year has increased. Experts believe that if inflation continues to remain under pressure, RBI may increase interest rates by 25 to 50 basis points after October.
In the Moneycontrol report, experts are also warning that the situation may change in the coming months. If crude oil prices remain high and food inflation increases, then RBI may have to take a decision to increase interest rates by the end of the year. Due to this, EMI of common people may become expensive.
Interest rates may increase in October
Most of the 11 economists surveyed by Moneycontrol believe that the RBI may increase the overall rate by 25 to 50 basis points in FY 2027 in the October policy meeting or thereafter. According to the average estimate of the survey, RBI’s policy rate may reach 5.75 percent by the end of FY27, which is currently 5.25 percent. Experts say that the ongoing geopolitical tension in West Asia, expensive crude oil, weak rupee and weather related challenges are becoming major reasons for increasing inflation. The average price of crude oil in the Indian basket in May was $ 107.96 per barrel. At the same time, the rupee has also weakened against the dollar and reached 96.96.
Its effect is now visible on the pockets of common people also. The government has recently increased the prices of petrol and diesel by Rs 4 per liter. Apart from this, there is also a rise in the prices of milk and gold. Experts believe that due to all these reasons, retail inflation may increase further in the coming months.
Expert opinion
According to Kotak Mahindra Bank economist Upasana Bhardwaj, the threat of inflation remains due to rising energy costs, high input costs and weak rupee. However, he also said that the country’s economic activities are still looking strong. Whereas ICRA’s Aditi Nair has increased the crude oil estimate for the financial year 2027 from $85 to $95 per barrel in view of the tension in West Asia. He said that RBI may adopt a cautious stance in June.
Astha Gudwani of Barclays says that tensions in West Asia can slow down India’s economic growth. There is also a risk of energy and food inflation increasing. Despite this, he is hopeful that RBI will keep the interest rates stable in June. However, some economists believe that as long as inflation does not cross the RBI’s upper limit of 6 percent, the central bank can avoid tightening. Overall, there is hope of relief in the June meeting, but the danger of EMI increasing in the coming months is not completely averted.
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