EMIs to rise as Reserve Bank hikes repo rate by 50 bps; 2nd increase in 5 weeks

TIL Desk/National/Mumbai/ Home, auto and other loan EMIs will rise after Reserve Bank of India on Wednesday raised the key interest rate by 50 basis points, the second increase in five weeks, to rein in rise in prices that it saw continuing to hurt consumers in the near term.

With inflation persistently hovering above the upper tolerance limit of 6 per cent, the RBI’s six-member rate-setting panel voted unanimously to raise the lending rate of the repurchase (repo) rate by 50 basis points to 4.90 per cent, Governor Shaktikanta Das said.

The Standing Deposit Facility rate and the Marginal Standing Facility Rate were accordingly adjusted higher by the same quantum to 4.65 per cent and 5.15 per cent, respectively. The increase follows a 40 bps rise in early May at an unscheduled meeting that kicked off the central bank’s tightening cycle.

To balance the inflation-growth dynamics, Das said RBI will remain focused on the withdrawal of accommodation as system liquidity continues to be high. Withdrawal of accommodation will be done in a way that growth will continue to get adequate support.

The Monetary Policy Committee (MPC) raised its inflation forecast for the current fiscal (April 2022 to March 2023) to 6.7 per cent from April prediction of 5.7 per cent but retained its economic growth projection at 7.2 per cent.