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Inflation up, EMIs to follow

business Updated: Jul 15, 2010 00:53 IST
HT Correspondent
HT Correspondent
Hindustan Times
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With India's inflation rate galloping to 10.55 per cent in June, up from 10.16 per cent in May, a hike in interest rates is widely expected — and soon. Inflation rate set to moderate?

So expect your EMIs to go up.

The higher inflation rate in June partly reflects the increase in fuel prices that were raised on June 25. But economists said the full impact of the fuel price hike would be visible only in the July inflation figures.

All eyes are now on the Reserve Bank of India's (RBI's) July 27 meeting for the quarterly monetary policy review.

“We expect the RBI to hike rates by 0.25 percentage points at the review,” said Barclays Capital economist Rahul Bajoria.

A hike is expected in the repo and reverse repo rates that now stand at 5.5 per cent and 4 per cent respectively.

A higher repo rate — the rate RBI lends to banks, — will make it costlier for banks to borrow, prompting them to charge more from consumer, corporate and home borrowers.