After the retail inflation, the wholesale inflation figures for the month of April have also been released. Retail inflation stood at 4.70% in April, an 18-month low. While wholesale inflation also came in at -0.92%, a 34-month low. To control inflation, the central bank has increased the repo rate by 2.50% since May last year, from 4% in April last year, to 6.50% now. However, now that inflation is under control, the repo rate is likely to be reduced.
MPC meeting of RBI
RBI’s Monetary Policy Committee (MPC) to be held next month i.e. June or not repo rate hike? This will determine the inflation data coming in May. The previous meeting of the MPC put a temporary pause on rate hikes, but before that the repo rate was hiked several times in a row. Retail inflation is likely to hover around 4% in May, so an interest rate hike is unlikely. Due to increase in repo rate, banks increase interest on all types of loans, which directly affects consumers.
Inflation will fall further
Meanwhile, if the RBI decides not to hike rates, on the one hand, borrowers will be relieved, but fixed depositors (FDs) will be shocked. If the repo rate goes down, it will also affect the interest earned on FDs and they will come down. But the RBI’s decision will depend on the May retail inflation data. Whereas the inflation rate in April 2023 was 5.30%. That means only food became cheaper. There has been no change in fuel prices since last year. Apart from this, the reduction in crude oil prices is likely to reduce the prices of petrol and diesel. Therefore, inflation is likely to come down further in the future.