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RBI rate hike will not bother you immediately

RBI rate hike will not bother you immediately

If you want to book a car or buy a house now, don't expect increase in your EMIs.

Mumbai: The Reserve Bank of India on Tuesday raised its key short-term lending and borrowing rates by 0.25 per cent each with immediate effect.

The short-term lending (repo) rate has been hiked to 6.50 per cent and the borrowing (reverse repo) to 5.50 per cent.

Here is what the hike in rates by Reserve Bank of India means for you and me.

Banks normally take the signaling rate as an indication whether they should raise rates or not. However, bankers on Tuesday said they will not immediately raise rates.

They already anticipated signals from RBI and they have been raising both deposit and lending rates.

So immediately, because of this policy, one doesn't expect a arise in any of the rates or your EMIs.

Which means, if you want to book your car or buy a house at the moment, don't expect increase in your EMIs.

Likewise hike of deposits are already all over the place. They will not get anymore expensive so you can open your FDs if you want. This is as far as how it impacts you and me.

The other part of policy is its angst over inflation. It has raised the forecast for March 31 to 7 per cent from the old target of 5.5 per cent.

There were forecast that the inflation would come down to 5.5 per cent but now it will come down from current 8.5 per cent to only 7 per cent.

Worried over inflation, the RBI said it does not have enough tools to bring it under control and the prospect looks gloomy.
first published:January 25, 2011, 16:35 IST