Inflation has thankfully started to cool off… Crude oil, metals and minerals and food prices are now headed southwards. These were the key categories fuelling incremental inflation. Many experts believed that the inflation will come down to 6% by end-March 2009. Given the steep fall in inflation, worsening IIP and GDP data, it was expected that RBI will lower repo rate by at least 100 basis points and the reverse repo rate by minimum 50 basis points.
But will banks lower rates adequately and pass on the benefits to the customers? Till the time the RBI continues to sell dollars to support the rupee, the banks will remain apprehensive about the liquidity situation. Thus, the lending and deposit rates are unlikely to ease immediately or match the decline in policy rates. This clearly means that the customers need to wait for a few more months before the interest rates start falling. They need to postpone their plans of buying a dream home, buying personal belongings like car, and taking loans in any other form.
