Investors Weigh Timing of Fixed Deposit Investments

Rising Crude Oil Prices Fuel Inflation Concerns

As crude oil prices continue to rise, concerns are growing that inflationary pressures could return, leaving many fixed deposit (FD) investors wondering whether they should lock in current rates now or wait for more clarity after the Reserve Bank of India's (RBI) upcoming monetary policy review.

Most experts expect the RBI to maintain status quo in the upcoming policy meeting, keeping both rates and stance unchanged amid rising geopolitical uncertainty. The RBI is likely to stay cautious given the inflation outlook, with many experts anticipating a wait-and-watch approach for now.

According to Dharmakirti Joshi, Chief Economist at Crisil, the RBI will keep the repo rate and stance unchanged in the upcoming monetary policy. Risk to inflation are on the upside and will increase with the duration and intensity of the West Asia conflict. Currently, CPI-based inflation as well as core inflation are well within the comfort zone.

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Experts also point out that the RBI's communication will be critical in shaping inflation expectations. Rajnish Gupta, Partner at Tax and Economic Policy Group, EY India, notes that anchoring inflation expectations will be a critical consideration for the Monetary Policy Committee (MPC). The RBI would need to communicate carefully that it remains vigilant without causing alarm.

Should FD investors wait? Experts say FD rates still remain reasonably attractive despite some moderation in recent months. As a result, locking into current rates could be a practical move instead of waiting for a potentially uncertain rate cycle.

According to Saurabh Jain, Co-Founder & CEO at Stable Money, investors should consider securing prevailing rates rather than delaying investment decisions. "If rates stay stable for the next few months, waiting for the June meeting doesn't gain you much. In fact, locking in now at current rates makes sense because further cuts may not materialise."

Experts also suggest that instead of making one large FD investment at a single tenure, investors can consider deposit laddering. This involves spreading fixed deposits across multiple tenures so that they mature at different intervals. This provides flexibility, as some portion of the money becomes available periodically for reinvestment, expenses, or shifting to better opportunities.

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Comparison of FD Rates

Experts say investors should remember that flexibility always remains. If the RBI's future policy decisions lead to better FD rates, deposits can still be reinvested or upgraded accordingly. Waiting solely in anticipation of a rate revision could mean missing out on the rates currently available in the market.