Loans may get cheaper as RBI set to cut rates

New Delhi: Home and auto loans are likely to get cheaper as the Reserve Bank of India (RBI) is expected to cut interest rate by at least 0.25 per cent this week.

In its last meeting, the Monetary Policy Committee had refused to slash interest rate citing risk of increase in inflation. However, data since then has shown that inflation has dropped more than what was expected, increasing pressure on the MPC to cut interest rate. 

The government has also been pushing for a rate cut to give a boost to economic activity and encourage private investment. In fact, chief economic adviser Arvind Subramanian had ridiculed the MPC for “systematic inflation forecast errors”.

“At the August 2 meeting, we expect the RBI to cut rates by 0.25 per cent but maintain its neutral policy stance. We do not expect further easing beyond this additional rate cut in this cycle,” said Morgan Stanley in a report.