Higher Bank FD interest rates may fall by 50 bps or more in 2024; You have this much time to invest

economictimes.indiatimes.com:

fixed deposit investors who saw a significant rise in interest rates. While the highest FD interest rate in major banks generally is in the range of 7%-8%, it went up to 9.5% and above in some small finance banks.

However, 2024 may see a complete reversal of the interest rate cycle.

There is, however, still some time left for the rate cuts to start and not all tenures of FDs will be equally impacted. Here we tell you how long you can enjoy the current high-rate regime and whether it will be the short-term FDs or the long-term FDs that will be impacted more by the rate cuts.

What should you do to make the best out of your FDs in 2024?

Repo rate cut by RBI is likely to start in first half of 2024
The cycle of hikes that FD rates witnessed in 2022 and 2023 was primarily led by the repo rate hikes by the RBI. However, this repo rate hike cycle ended in February 2023 and since then the central bank has kept the key policy rates unchanged.

RBI uses the repo rate hikes to contain retail inflation, which is one of its primary objectives. Though retail inflation in November 2023 surged to 5.5% per annum compared to 4.85% in October, however, it is still within the RBI's tolerance zone of 2-6%, so the possibility of a repo rate hike is remote unless retail inflation shoots up significantly.

With the likelihood of any repo rate hike being very low, FD interest rates appear to have reached closer to their peaks in the current cycle.

However, this will change the moment RBI starts reducing the repo rate, which is not too distant. “Without getting into the timing of rate cuts, given the inflation markers and various advisories, we believe the conditions for rate cuts may exist at some point in H1-2024, especially if there are no