In a period of two months, possibility of the interest rates being hiked by RBI is foreseen during the ensuing bi-monthly policy meeting. More Details are furnished below:
- A positive change resulting in high risks of inflation is said to be the main reason for the increase.
- A poll conducted consisting of over 22 market participants revealed that a majority of them were of the opinion that there would be an increase in the interest rates atleast by 25 Basic Points.
- RBI further adds that the increase in the cost of inflation was due to
- Increased oil prices,
- Volatility in the global financial market, and
- An increase in the Minimum Support Prices (MSP) for agricultural crops
- Also a continuous raise in the retail inflation due to an increase in the Consumer Prices from 4.7% to 5% in May was also said to be another reason for a possible rate hike.
- A weakening rupee value is also a factor attributed to be the cause for an increased inflation.
- Earlier RBI had announced that the future rate moves would be Data dependent including
- Impact of farm support prices
- Crude oil movement and
- Higher allowances to Government Employees.
- A rate hike would mean that RBI stands up to its commitment of targeting inflation which otherwise bring down the risks to macroeconomic stability, in view of the global disturbances.
- RBI is not in favour of hardening the process of rate hike since the oil prices would come down to the range of $45 to $65 a barrel in the coming years, due to US shale production and OPEC (Organization of Petroleum Exporting Countries) supply side cuts.