Loans to get costlier as RBI hikes repo rate again

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"Actual inflation outcomes have been slightly below the projected trajectory as the seasonal summer surge in vegetable prices has remained somewhat muted in comparison with its past behaviour and fruits prices have declined", it said.

Five members of MPC - Chetan Ghate, Pami Dua, Michael Debabrata Patra, Viral V Acharya and Urjit R Patel voted in favour of the decision while Ravindra H Dholakia voted against the decision.

The biggest anxiety in everyone's mind today is whether the ongoing rate hike cycle is likely to be a shallow one? "The main reason for increasing of the repo rate has been done to maintain the 4 per cent inflation target, a target from which we have been away for several months", said the RBI Governor.

Analyst said that this hike by RBI will not majorly affect non-resident Indians in the UAE, except those who are holding floating mortgage rates back home in India because most of the existing auto and personal loans are obtained at a fixed rates.

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But he also said the Bank may have taken an "unnecessary risk", saying: "Recent inflation data has been softer than expected and United Kingdom wage growth continues to remain subdued, suggesting that the United Kingdom economy may not be in as rude health as the BoE would like us to believe".

The BoE said Britain's economy, while growing more slowly than in the past ahead of Britain's departure from the European Union next year, was operating at nearly its "speed limit", or full capacity, raising the prospect of more home-grown inflation pressure ahead.

But the message for interest rates remained one of gradual and limited increases as the central bank saw inflation only a fraction above its 2 percent target over the next few years.

The MPC warned that "rising trade protectionism poses a grave risk to near-term and long-term global growth prospects by adversely impacting investment, disrupting global supply chains and hampering productivity".

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The interest rate decision improved sterling's standing versus the USA dollar but was still trading lower by around 0.1 percent at 1.311.

The Bank of England has raised the interest rate for only the second time in a decade.

For July-September, it expects retail inflation based on the Consumer Price Index at 4.2 per cent, and sees it firming up to 4.8 per cent in the second half of the current financial year. GDP growth is expected to rise to 1.8 per cent in 2019, above the 1.7 per cent expected in May. The repo rate is the rate at which banks borrow short term funds from the RBI.

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