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The results of the Lok Sabha elections are out. No party except the NDA has a majority. There is an intense discussion between both parties about which coalition will form the government. On the other hand, another question has begun to arise among ordinary people. This question is about reducing the loan EMI. The Reserve Bank of India’s monetary policy meeting began on Wednesday. In the meeting a decision has to be taken whether or not to reduce the repo rate i.e. loan EMI or keep the interest rates the same as for about a year and a half.
Common people hope that this time the RBI will reduce the repo rate. So that they can get relief from increasing loan EMI. In fact, inflation figures were low in the month of May. On the other hand, the European Central Bank has announced a reduction in interest rates. At the same time, a reduction in interest rates is also expected to be announced at the Federal Reserve meeting. In such a situation, this time the RBI may also cut interest rates.
Previously, the RBI had last changed the repo rate in February 2023. In that month, the RBI had increased the repo rate by 0.25 per cent. After which the repo rate became 6.50 percent. Prior to that, the RBI had continuously increased the repo rate by 2.50 per cent since May 2022. RBI has not made any change since February. Let’s try to understand whether RBI will reduce interest rates on June 7 or not.
Europe will cut interest rates
According to information, the European Central Bank is going to cut interest rates on Thursday this week by 0.25 percent. The special thing is that this cut by the ECB will occur after about 8 years. After which the ECB’s official interest rate will drop to 4.25 percent. According to foreign media reports, the ECB could reduce interest rates by 0.60 percent this year. The effect of this can also be seen in other countries around the world. After a few months, the Central Bank of England could also consider reducing interest rates.
The Fed can also make a big decision
On the other hand, the US Federal Reserve also plans to cut interest rates. For a few months now, there have been clear signs that the Fed could cut interest rates at its meeting in July. This reduction can be considered 0.25 percent. The Federal Reserve has to make two cuts this year. It can be seen on July 1st. The second reduction can be seen in the month of October or November. According to experts, inflation figures seem quite stable, but they have not reached the figures that the Federal Reserve wants to achieve. In such a situation, the Federal Reserve wants to wait until July.
Inflation figures in India
If we talk about inflation figures in India, retail inflation has been seen below 5 per cent for two consecutive months. Retail inflation in the month of March was 4.85 percent. After that, retail inflation figures in April were estimated at 4.83 percent. Retail inflation in the country in the month of April was the lowest in 11 months. At the same time, retail inflation figures in the country are considered to be less than 6 percent for the last 8 months. Inflation figures may be slightly lower in June. The figure can be as high as 4.50 percent. According to RBI estimates, inflation figures may remain at 4.5 per cent in the financial year 2024-25. Which was considered to be 5.4 per cent in the financial year 2023-24 and 6.7 per cent in 2022-23.
Will the loan EMI be reduced?
Now the biggest question is whether the RBI can announce a cut in the policy rate this week. Experts have some doubts about this. If experts are to be believed, the RBI’s MPC panel will not make any change in interest rates for the eighth consecutive time. Gaura Sen Gupta, chief economist at IDFC First Bank, said the RBI could take a decision to keep interest rates unchanged at the June policy meeting. She said inflation remains above 4 percent. Until the level of inflation falls below 4 percent, there is no expectation that interest rates will change. The overall policy tone will remain cautious amid the risk of rising food inflation due to the current heat wave. She said daily retail food prices indicate an increase in food inflation in the month of May.
