“The geopolitical situation caused by Russia’s invasion of Ukraine is weighing on all markets. Market watchers across the world have their eye on the US Federal Reserve which likely to announce a decision to increase rates later tonight. Central banks in many countries are raising rates to counter the effects of inflation. These costs of borrowing had fallen to record lows during the pandemic to bolster growth. Following this trend, the RBI has increased its repo rate from 4.00% to 4.40% and this is likely to have a significant impact on the market including on:
◦ Short term deposits – short and mid-term rates always rise quickest in response to any change in the interest rate cycle
◦ Retail borrowing: Interest rates are likely to be higher for new borrowers. Existing borrowers with floating interest rates will also be affected
Higher costs of living with the increase in prices of commodities due to a lack of supply where everything from food to gas and clothing cost more coupled with higher costs of borrowing will likely slow consumer spending, limiting growth, which has been the recent focus of the RBI’s Monetary Policy.” Anjana Potti, Partner, J Sagar Associates (JSA)
