EMIs to rise as RBI hikes interest rate again

Mumbai: In another shock for the common man, already reeling under the impact of spiralling prices of essential commodities, the RBI on Friday jacked up key interest rate by 50 basis points in the third straight increase since May which will have a cascading effect on Home, auto and other loan EMIs.

The increase in lending rate or the repurchase rate (repo) by 50 bps to 5.40 per cent is 25 bps higher than the prepandemic repo level. Reserve Bank of India (RBI) Governor Shaktikanta Das signalled that the second straight half-point hike wasn't the end of the rate tightening regime and more may come to tame inflation that has for six months stayed above the comfort zone of 6 per cent.

The central bank however did not revise its existing economic growth or inflation forecast despite indications of a global slowdown, recessionary conditions in the developed economies, and the moderation already witnessed in commodity prices.

 "Inflationary pressures are broad based and core inflation remains elevated. Inflation is projected to remain above the upper tolerance level of 6 per cent through the first three quarters of 2022-23, entailing the risk of destabilising inflation expectations and triggering second-round effects," Das said.

RBI said the volatility in the global market is leading to imported inflation. The spillover from geopolitical shocks has resulted in uncertainty in the inflation trajectory. Global commodity, metal and food prices have eased from recent peaks, however, they still remain elevated