{"id":18593,"date":"2023-04-19T17:13:12","date_gmt":"2023-04-19T11:43:12","guid":{"rendered":"https:\/\/www.moneyworks4me.com\/investmentshastra\/?p=18593"},"modified":"2023-05-08T16:41:24","modified_gmt":"2023-05-08T11:11:24","slug":"rbi-pauses-rate-hikes-what-does-it-means-for-investors","status":"publish","type":"post","link":"https:\/\/www.moneyworks4me.com\/investmentshastra\/rbi-pauses-rate-hikes-what-does-it-means-for-investors\/","title":{"rendered":"RBI pauses rate hikes, what does it means for investors?"},"content":{"rendered":"

Reserve Bank of India\u2019s decision to pause on rate hikes, by retaining the key lending rate at 6.5% came as a surprise for the market. The repo rate has seen a total 250 bps increase since May last year and the market expected another 25bps hike this time round.<\/p>\n

India’s retail inflation fell to a 15-month low of 5.66% in March as compared to 6.95% a year-ago and 6.44% in Feb 2023. This makes the RBI decision looks even better, as measures taken by a central bank to tame inflation seem to be working.<\/p>\n

RBI\u2019s priority is to maintain inflation in the 4-6% range and a key tool it has is changing things that change the interest rates. When it goes up it adversely affects people who are paying EMIs\u2013 they have to pay higher EMI and this reduces the money available for spending, thus reducing consumption of good and services in the economy. The same happens for companies repaying loans. Companies and individual postpone buying larger cost assets like bikes, cars, houses, etc. In short, it all reduces the demand and hopefully reduces the inflation but it also slows down growth in the economy.<\/p>\n

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So, it is all bad for everybody. No, there is some benefit that you can look at if you have money lying in the savings accounts. You can move it to FD or Debt funds (if you understand what to buy here). But for what period? Do you lock it in at the current rates because it may go down from here or wait because it will go up or partially invest some now and wait to invest the rest?<\/p>\n

This is not easy to predict and which is why investing in fixed-income assets is not so easy. But if rebalancing your asset allocation means you need to increase exposure to Debt, if as good a time as any to do so.<\/p>\n

But remember RBI governor Shaktikanta Das commented “The impact of our actions over the past 12 months is still playing out and would increasingly weigh on the future inflation trajectory.” This could mean he expects the 250bps rate hikes done till now has not yet fully done its job and hopefully the inflation will come down (as it did).<\/p>\n

But he also said that this pause does not mean the inflation problem is over for now and we can all relax as future hikes are unlikely. No, the RBI will take action to hike rates if inflation is not contained. Are there other things that can signal good times ahead? Yes, lower global oil and commodity prices, end of Ukraine war, good monsoon, etc. On the contrary higher inflation and excess liquidity could make RBI\u2019s MPC committee increase rates again.<\/p>\n

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Reserve Bank of India\u2019s decision to pause on rate hikes, by retaining the key lending rate at 6.5% came as a surprise for the market. The repo rate has seen a total 250 bps increase since May last year and the market expected another 25bps hike this time round. India’s retail inflation fell to a […]<\/p>\n","protected":false},"author":2886,"featured_media":18598,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[1166,3],"tags":[290,1523,426],"modified_by":"MoneyWorks4me","_links":{"self":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/18593"}],"collection":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/users\/2886"}],"replies":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/comments?post=18593"}],"version-history":[{"count":0,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/18593\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/media\/18598"}],"wp:attachment":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/media?parent=18593"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/categories?post=18593"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/tags?post=18593"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}