In what is certain to seriously affect the middle class consumers, RBI, afraid of inflation, has increased the interest rate yet again, by 50 basis points today.
My current home loan (which I will be exiting by September 2011) with ICICI Bank, is at an interest rate of 14.25% and that was before the current increase. Not sure, if ICICI will promptly up it to 14.75%. I am shopping around with other banks, and the interest rate appears to be more like 10-10.5% depending on the type of facilities you are looking at. This could also go up by the same 50 basis points.
Surely, there are better ways of handling inflation? Where will this lead us to? Industries will collapse at this sort of interest rate. Middle class will stop buying houses and vehicles. This will in turn affect the manufacturing and white goods sector, and so on.
Raising interest rates has hardly impacted the inflation though. So why do the same thing again and again and hurt the middle class?