Despite the RBI holding rates steady, high FD interest rates might not last long. This could be the last chance to lock in higher rates.
FD Interest Rates: The RBI maintained the 6.5% repo rate at its MPC meeting on June 7. Investors in fixed deposit accounts who profit from high rates are benefited by this, the ninth consecutive MPC with status quo. On the other hand, the interest rate cycle will eventually reverse. It is predicted that there may be a rate cut later in the year.
The Monetary Policy Committee (MPC) meeting of June 7 saw the Reserve Bank of India (RBI) vote to maintain the 6.5% repo rate in place. The central bank has chosen to keep things as they are for the eighth straight MPC.
Investors in fixed deposits are not grumbling since they will continue to benefit from a high interest rate regime. The consensus among analysts is that the cycle of interest rate hikes has essentially come to an end, and sooner or later, interest rates will begin to decline. The cycle of falling interest rates has, however, taken longer to begin.
We explain to you how long the current high rates will last, the potential significance of this year's rate drop, and what to do with your fixed deposit investment.
Low retail inflation means the RBI will probably wait longer.
One of the most important variables that still influences the RBI's policy decisions is inflation. In response to persistently high retail inflation of 7.79% in April 2002, the central bank hiked interest rates by 2.5% between May 2022 and February 2023. Since then, the RBI has been waiting for retail inflation to continuously stay close to its comfort level of 4% (- + 2%), which has resulted in policy rates remaining steady for the past 15 months. The April 2024 retail inflation data has confirmed.
Strong economic growth facilitates the RBI's decision to decrease rates soon.
Experts predict that the central bank will keep a careful eye on inflation in light of the GDP figures.
Recent economic data show that GDP growth slowed to 7.8% year over year in the fourth quarter of the most recent fiscal year, from 8.6% in the previous quarter. This was an improvement above the 6.1% growth recorded in the same quarter the year before. According to Swati Saxena, founder and CEO of 4 Thoughts Finance, "this complex economic environment suggests the RBI will likely prioritise bolstering economic recovery while vigilantly monitoring inflationary trends."
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