RBI expected to raise key interest rate to 5.5% Wednesday
The Reserve Bank of India is expected to bump up its key interest rate to 5.5% this Wednesday, mainly because inflation just won't cool off and oil prices keep rising.
This move has investors and market participants watching closely, since it could affect everything from bank loans to car and home purchases.
Higher rates squeeze big purchase demand
Higher rates might help banks earn a bit more on loans, but they also make borrowing costlier for the rest of us.
That means buying a house or a new car could get tougher, with demand likely to dip, especially if you're looking at big purchases.
As Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, puts it, developers with less debt might handle these changes better than others.
Borrowing costs curb consumer durables, infrastructure
It's not just about homes and cars: higher borrowing costs can also put the brakes on spending in areas like infrastructure and consumer durables.
With foreign investors pulling out and markets feeling jittery thanks to high bond yields and oil prices, things are a bit uncertain right now, so many are playing it safe until the dust settles.