The Reserve Bank is likely to maintain stability in the repo rate in the next week's meeting

Mumbai: There is a possibility of stopping the interest rate hike in the meeting of the Reserve Bank of India's Monetary Policy Committee (MPC) in April. The interest rate has been increased by two and a half percent since May last year. The current rate of 6.50 percent is the highest since February 2019.

A report by SBI Research has said that the Reserve Bank is now expected to get an estimate of how the increase in interest rates so far has affected the economy, so it is more likely that it will maintain the repo rate even though inflation is above 6 percent.

A slowdown in loan disbursements for affordable homes and the banking crisis in the US and Europe may also stabilize interest rates.

Raising interest rates weakens demand, which automatically brings down inflation. In early 2020, the repo rate was reduced to 4 percent during the Corona period.

The accommodation trend will continue to pull back in the first meeting of the MPC of the next financial year starting on April 3. Despite liquidity pressures, this trend may reverse, the report noted.

After Corona, there is no possibility of inflation going down below 5.50 percent due to increasing expenditure on health and education and high cost of transport due to high fuel prices.

Inflation in the country has moderated, but remained above 6 percent in February, which is outside the Reserve Bank's ceiling.

Withdrawal of indexation benefits on long-term debt mutual fund investments by the finance ministry is likely to increase deposits in the banking system, which is expected to boost liquidity in banks.