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Home Loans, Car Loans Unlikely To Get Cheaper As RBI Holds Interest Rates Steady

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Loans are unlikely to get cheaper anytime soon, as the Reserve Bank of India today held interest rates steady in its Feb Monetary Policy meet. The country's central bank left repo rates at previous levels. Repo rates are interest rates at which the country's central bank lends money to commercial banks in the country.

The worry for borrowers is that the statement sounded more hawkish, which means any significant interest rate declines in the immediate future are ruled out.

Home Loans, Car Loans Unlikely To Get Cheaper As RBI Holds Interest Rates Steady
 

In fact, at best there may be just one more interest rate cut this year. So, if you are planning to take home loans and are waiting, do not expect a big interest cut advantage. Take a look at the tone of the RBI's statement, which shows that the country's central bank is still worried about inflation.

"CPI inflation excluding food and fuel rose for the fourth successive month. Excluding petrol and diesel from this category, inflation remained flat. A breakdown into goods and services categories shows that while goods inflation declined, services inflation has been sticky since September 2015 across housing, transport and communication, medical and other services. Household inflation expectations remain elevated and the rate of increase in corporate staff costs picked up. On the other hand, rural wage growth has been muted.

The country's central bank also remained worried about the inflation trajectory due to the 7th Pay Commission. "However, the implementation of the VII Central Pay Commission award, which has not been factored into these projections, will impart upward momentum to this trajectory for a period of one to two years," the RBI has said.

When inflation tends to be worrisome for the RBI, there can be no interest rate cuts. So, if you are expecting a relief from interest rate cuts in the near term, it may not happen immediately.


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