The 12 rate hikes by the Reserve Bank in the past 18 months
have failed to hurt growth in aggregate demand, as households’ current
borrowing levels are low and they have sufficient liquidity to absorb the
increased interest rates, says leading financial services agency CMIE.
“Though the RBI’s
interest rate hikes have been transmitted well, with banks responding to the
announcements by passing on the rate hikes to borrowers, these hikes do not
seem to hurt the growth in aggregate demand,” CMIE said.
The report further says that while leveraged consumption
demand from the households is expected to be hurt, the impact of the rate hikes
on aggregate demand is likely to be too small to make a difference.
Source; The Business Line
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