Consumers are likely to witness bigger interest rate burden on their housing and personal loans, with soaring inflationary pressure pushing up expectations for a rate hike by the Reserve Bank.
Analysts believe that RBI might hike its benchmark short-term interest rate during its monetary policy meeting on October 31, as inflation has soared to a four-month-high of 5.26 per cent despite the government's repeated attempts to contain the price rise of various essential commodities.
Analysts at global financial services major Morgan Stanley said RBI was most likely to hike its key short-term rates by 25 basis points on Tuesday.
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The Central Bank has already raised the rates three times this year.
Earlier in July this year, RBI had raised its repo rate, the rate at which the central bank borrows from the banks, to 7 per cent, while the reverse repo rate, the rate at which banks park their short-term excess liquidity with RBI, was raised to 6 per cent.
If RBI decides to raise its benchmark rates on Tuesday, the banks are expected to soon follow suit with an equivalent hike in their interest rates to be charged from the consumers on various products like home loans, personal loans and auto loans.
Earlier in July, when RBI announced its last rate hike, a number of analysts had forecast at least one more rate hike this fiscal, saying that another hike was necessary on the back of slowdown in the credit off-take and pressure on the lending rates and to contain inflation in the targeted range of 5.0-5.5 per cent.
