EMI Relief: According to data released on August 14, 2023, retail inflation rebounded to a 15-month high of 7.44 percent in July, up from 4.81 percent in June. The increase in the rate of retail inflation shows how much inflation is bothering the common man. This figure has also dashed hopes of relief from costly EMIs in the current year.
Expensive EMI will not provide relief.
With retail inflation falling to 4.32% in May and 4.81% in June, it was speculated that if retail inflation came close to 4%, people could get relief from expensive EMIs. But after retail inflation rose to 7.44 percent and food inflation to 11.51 percent in August, the hope of relief has now become meaningless. CPI inflation has crossed the upper end of RBI’s tolerance band of 6 percent. While the RBI’s target is to bring it down to 4 percent, that is not in sight at the moment.
RBI raises inflation forecast
On August 10, when the RBI announced the monetary policy, it raised the inflation forecast for the current fiscal year 2023-24 to 5.4 percent from 5.1 percent. The RBI also no longer expects inflation to come close to 4 percent in the current fiscal year. In such a case, people will have to wait for a long time to get relief from expensive EMI.
EMI became expensive by 20% in 2 years.
From May 2022, the RBI hiked the repo rate from 4 per cent to 6.50 per cent in six steps to curb inflation. That is, the repo rate was increased by 2.50%. As a result, repo rate-linked home loan EMIs become expensive. Property consultant Anarock also said in its recently released report that EMI has become expensive by 20% in 2 years. The interest rate on home loans up to Rs 20 lakh was 6.7 per cent in mid-2021, which has now increased to 9.15 per cent in 2023.
Waiting for inflation to come down
Now, after the increase in the inflation rate, the RBI will wait for a reduction in the inflation rate. RBI will wait for the inflation rate to come closer to 4% if food supply improves, if inflation also moderates due to lower food prices, which is unlikely at present. . In such a case, expensive EMIs will continue to bother home buyers for a few more months and if the inflation rate rises further, the possibility of EMIs becoming more expensive cannot be ruled out.
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