After increasing the interest rates by the US Fed Reserve, the possibilities of increasing the interest rates have increased in the three-day RBI MPC meeting in June. By the way, there have been indications from the Fed that a pause will be imposed on the increase in interest rates.
America's Central Bank Fed Reserve has increased the interest rates for the 10th time in a row. The speed with which the Fed has increased the interest rates has broken the 43-year record in the US and the interest rates in the US have reached a 16-year high. According to the data, the Fed has increased the policy rate by 25 basis points. After which the range of interest rates has reached 5 to 5.25 percent. By the way, Fed has given indications of rate hike pause. Inflation in America is not taking the name of stopping, due to which the Fed is increasing the interest rates. Due to this rate hike, the pressure on American banks has also increased and the banking sector is on the verge of collapse. Three banks of America have sunk and they have been bought by other big banks.
Reason for the rise in interest rates
The Fed started the process of increasing interest rates from March 2022. At that time, due to the start of Russia and Ukraine war, the supply chain was disrupted worldwide and inflation had increased in all the countries around the world. Apart from this, the effect of Kovid was also being seen on the entire economy of the world. At that time, the US Fed started increasing interest rates from zero, which has increased to more than 5 percent today. Experts say that this level of interest rates was seen when there was recession in America in the year 2008. It is clear that signs of recession have started coming again in the world, but no country is ready to say this openly.
The US Fed on 22Mar2023 raised its federal funds rate by 25 basis points to 4.75%-5.00%.
https://t.co/iF33Ky98Kg - fed funds rate - pic.twitter.com/ijSj5I54Kq
Rate hike will stop
According to Reuters report, Fed Chief Jerome Powell has indicated rate hike pause. The major reason behind this is believed to be the sinking of banks in America. Banks and experts had indicated a pause in the earlier meeting and advised the Fed to put a stop to the interest rate hike. Because the banks are suffering a lot. Already three banks have collapsed in America. In which the new name First Republic Bank has also been added after the Silicon Valley signature. According to the report, 186 banks of America are going through a crisis. In such a situation, it has become necessary for the Fed to put a pause in the interest rates.
What will be the effect on India?
Whenever there has been an increase in interest rates in America, the Central Bank of India has also increased the policy rate. But in April, RBI broke this myth and put a halt to the increase in interest rates. Now the question is whether India will increase the interest rates in the next rate cycle i.e. June. Many experts have answered yes to this question. Told on the condition of anonymity that if the Karnataka elections were not held in May, the interest rates would have increased. But due to some relief in the inflation figures, the rate cycle was stopped. Some experts say that the increase in interest rates or not will depend on the inflation figures. Let us tell you that RBI has increased the repo rate by 2.50 percent from May 2022 to February 2023. After which the country's policy rates have come down to 6.50 per cent.
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