Whether EMI of home loan and car loan will be reduced or not, finalized
Home loan EMI - Reserve Bank of India (RBI) has not made any change in the repo rate since last year, due to which home loan, car loan and other loans have become expensive. Customers have been expecting for a long time that after the repo rate cut, the loan EMI will become cheaper. Now a big update has come out on this. Let us know in the news below-
The Kalamkar News (Bureau). The Reserve Bank of India (RBI) has not changed the repo rate for a year. At the same time, between May 2022 and February 2023, the policy rate was increased by 250 bps.
Due to this, all types of loans including home loan, car loan have become expensive. Customers taking loans are having to pay more interest.
Now good news has come for the loan takers. Due to decline in retail inflation, expectations of repo rate cut have increased. According to the report, RBI will change its stance by the end of the first quarter of FY2025 and will thereafter cut rates in the third quarter. That means EMI will start decreasing by the end of the year.
Retail inflation came within RBI's target
India's January CPI inflation (retail inflation) fell in line with expectations to 5.1 percent, while core inflation remained subdued at 3.5 percent.
Sequentially, headline inflation declined by 0.1 per cent (December: -0.3 per cent). First, a decline was seen in the prices of vegetables, followed by fruits, spices, pulses, oils and fats. Meanwhile, prices of grains, meat and fish and eggs rose in January, the report said.
Durable inflation (increased) and food and beverage inflation (except vegetables and fruits) have declined in the last few months.
As expected, the pace of inflation has started to moderate. However, the report said uncertainty remains, with adverse weather events impacting food prices and the Red Sea conflict (among other geopolitical tensions) impacting energy prices. With this, the way for reduction in repo rate has started becoming clear.
Repo rate will be cut in the third quarter
The report further said, we expect the first repo rate cut to happen only in 3QFY25, based on easing food price pressures and the US Fed's rate cut cycle in 2HFY24.
Before a rate cut, we expect RBI to change its stance to neutral by the end of Q1FY25. On the liquidity front, we expect RBI to continue to inject liquidity into the system to bring overnight rates closer to the repo rate.