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Wednesday, June 5, 2024

Inflation figures show a decline, will RBI make loans cheaper this time?

The RBI MPC meeting has started on June 5. The RBI governor will announce his policy rate on June 7. The biggest question is whether the RBI will give relief to the common people by reducing the loan EMI? This expectation is also because the European Central Bank is going to cut interest rates after many years on Thursday.

The results of the Lok Sabha elections have come out. Not just one party but the NDA has got the majority. Both sides are deeply deliberating on which alliance will form the government. On the other hand, another question has also started creeping up among the common people. This question is about the reduction of loan EMI. The monetary policy meeting of the Reserve Bank of India has started on Wednesday. In the meeting, a decision has to be taken on whether to reduce the repo rate i.e. loan EMI or not, or whether to keep the interest rates the same as they have been kept for about one and a half years.

Common people are hoping that this time RBI will reduce the repo rate. So that they can get relief from the increased loan EMI. In fact, inflation figures were low in the month of May. On the other hand, the European Central Bank has announced a cut in interest rates. At the same time, it is also expected that a cut in interest rates may be announced in the Fed meeting as well. In such a situation, this time RBI can also cut interest rates.

Earlier, RBI had last changed the repo rate in February 2023. In that month, RBI had increased the repo rate by 0.25 percent. After which the repo rate became 6.50 percent. Before that, RBI had continuously increased the repo rate by 2.50 percent since May 2022. RBI has not made any change since February. Let us try to understand whether RBI will cut interest rates on June 7 or not?

Europe will cut interest rates

According to the information, the European Central Bank is going to cut interest rates by 0.25 percent on Thursday this week. The special thing is that this cut by the ECB is going to happen after about 8 years. After which the ECB policy rate will come down to 4.25 percent. According to foreign media reports, the ECB can cut interest rates by 0.60 percent in the current year. The effect of which can also be seen on other countries of the world. After a few months, the Central Bank of England can also consider cutting interest rates.

Fed can also take a big decision

On the other hand, the US Fed Reserve is also planning to cut interest rates. For the last few months, there are clear indications that the Fed may cut interest rates in the meeting to be held in July. This cut can be of 0.25 percent. This year the Fed has to make two cuts. The first can be seen in July. The second cut can be seen in the month of October or November. According to experts, the inflation figures are looking quite good, but have not reached the figures that the Fed wants to bring. In such a situation, the Fed wants to wait till July.

Inflation figures in India

If we talk about inflation figures in India, then retail inflation has been seen below 5 percent for two consecutive months. Retail inflation was at 4.85 percent in the month of March. After that, retail inflation figures were seen at 4.83 percent in April. Retail inflation in the country was the lowest in 11 months in the month of April. At the same time, retail inflation figures have been seen below 6 percent in the country for the last 8 months. Inflation figures may be seen a little less in the month of June. The figure may come to 4.50 percent. According to RBI estimates, inflation figures may remain at 4.5 percent in the financial year 2024-25. Which was 5.4 percent in the financial year 2023-24 and 6.7 percent in 2022-23.

Will the loan EMI be reduced?

Now the biggest question is whether RBI can announce a cut in policy rate this week. Experts have some doubts on this. According to experts, RBI's MPC panel will not make any change in interest rates for the 8th consecutive time. IDFC First Bank Chief Economist Gaura Sen Gupta said that RBI can decide to keep interest rates on hold in the June policy meeting. He said that inflation is more than 4 percent right now. While no tampering with interest rates is expected until the inflation level does not go below 4 percent. The overall tone of the policy will remain cautious with the risk of food inflation rising due to the current heat wave situation. He said, the daily retail food prices are indicating an increase in food inflation in the month of May.

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