How will the RBI's rate hike impact you? 7 things you need to know

Reserve Bank of India (RBI) is likely to announce a repo rate hike of 25 basis points on Thursday. The consecutive increase in interest rates by bank has left the investors and customers curious about how the next move by the Central Bank could impact the market.

7 things you need to know about RBI's repo rate hike:

• The repo rate has been increased in the month of February by 25 basis points, taking the total interest rate to 6.50%. This was done because of the growing concern of rising inflation. Increase in repo rates are introduced to tame inflation.
• The repo rate is the interest amount that the RBI charges commercial lenders. In return, the banks increase its interest rates for customers. This demotivates general people from borrowing and less spending which can ultimately create lesser demand in the market. 
• From the year 2022, interest rates have been hiked 6 times by the Reserve Bank of India (RBI), and the last 4 have been consecutive. From 4%, the interest rate has gone up to 6.50% in a period of 12 months. 
• India's inflation rate is currently on the mend. In february, India's inflation stood at 6.44% in February. 
• Moreover, the markets in Asia were on a rise yesterday. However, countries like Australia have decided to keep the interest rates steady due to the uncertain market scenarios. Whereas, USA and EU decided to increase its rate in the month of March as well, however, lower than expected increase. 
• However, the oil prices will be increasing in the coming month as oil countries have decided to cut supply from May 1 till the end of the year. The increase in oil price will make it strenuous to control inflation, until the demand remains steady.  
• The increase in repo rate can have an adverse impact on the economic growth of a country. As the price of goods increases, demand decreases. This also bars the underprivileged to have access to necessary goods. 
• The increase in repo rates have an impact on all kind of loans available in the banks, be it mortgages, home loan, vehicle loan, credit card interest, EMI etc. Once the repo rate decreases taking loans from bank becomes cheaper as the interest rates on these loans decreases. 

What to expect?

RBI will likely raise the interest rate by 25 basis points yet gain to have a control on the impact of possible rise in global inflation. However, this might be the last repo rate hike in the ongoing pattern of hikes. The US Federal Reserve and Central Bank of Europe, the two global financial leaders have increased their rate, thus, convincing India to do the same.