The era of cheap loans will continue, UBS estimates RBI will keep rates stable till August

In the policy review held last week, the Reserve Bank did not change key rates for the 10th time in a row, while maintaining its accommodative stance on policy matters.

The era of cheap loans will continue

Image Credit source: PTI

The era of cheap loans may continue for a few more months. reserve Bank ,RBI) had not changed the key rates in the February policy review. Now it is being speculated in a report that the Reserve Bank will review the next policy.Policy Review) will also not make any change in the prime rates. Because the inflation rate (inflation) these are still in line with the estimates. Switzerland-based brokerage UBS believes that there is no possibility of any change in policy rates in the next monetary review, despite retail inflation rising to 6.01 percent in January and expected to remain at this level till April.

Not likely to change in next review as well

Tanvi Gupta Jain, Chief Economist, UBS Securities India, said on Tuesday that the latest inflation figures are largely in line with estimates and are behind adverse base effect and supply-related aspects. He said that the monetary policy committee of the Reserve Bank will refrain from increasing policy interest rates in the first half of the year 2022, despite the increase in retail inflation and its forecast to remain around 6 per cent till April. According to the retail inflation data announced on Monday, it has gone up to 6.01 percent in January. Whereas, the wholesale inflation rate has been in double digits at 12.96 percent. However, he said that in the second quarter of this year, the Monetary Policy Committee may take a decision to hike interest rates by half a percentage point in August.

Inflation at 7-month high

Retail inflation rose to a seven-month high of 6.01 per cent in January. This level of retail inflation is slightly above the Reserve Bank’s satisfactory range. Meanwhile, the inflation figure for December 2021 has been revised to 5.66 per cent from 5.59 per cent. It was 4.06 percent in January 2021. Earlier, inflation was at a high of 6.26 per cent in June 2021. According to the inflation data released by the National Statistical Office (NSO) on Monday, the inflation rate in food articles stood at 5.43 per cent in January 2022 as against 4.05 per cent in the previous month. The Reserve Bank mainly considers inflation based on consumer price index while considering monetary policy. Last week itself, the Reserve Bank of India (RBI) did not change the key policy rate repo for the 10th time in a row on Thursday to give momentum to the economy affected by the Kovid-19 epidemic on a sustainable basis and kept it at a low level of four percent. Keeping the rate unchanged means that there will be no change in the monthly installment of the bank loan. At the same time, the RBI maintained a lenient stance on the policy issue amid high rate of inflation. That is, there is no possibility of an increase in the policy rate at the moment.

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