The Reserve Bank of India (RBI) is set to hike interest rates today, after an off-cycle increase last month to combat runaway inflation.
That is likely to push the equated monthly instalments (EMIs) on your loans higher, adding to the burden of the common folk, who are already reeling from surging prices of goods.
Prices have risen across the board, from food to services, and the expected increase in interest rates is going to weigh on the already-stretched monthly household budget.
Banks have been quick to pass on that rate hike in May by increasing their lending and deposit rates, with HDFC Bank the latest which hiked twice in a month.
While banks usually take time to pass through any rate cuts, the transmission of hikes is almost always immediate.
That suggests, banks would pass on the RBI's expected rate lift-off onto customers before the turn of the week.
That is the dilemma the RBI faces.
RBI Governor, Shaktikanta Das last month had said the expectations for a June rate hike, was a “no brainer.”
But he also acknowledged the central bank's tough balancing act - bringing inflation down without impacting the nascent recovery from the pandemic-led economic slowdown.