Why Do FD Rates Fluctuate?
- Posted:20th November, 2024
- Updated:20th November, 2024
Fixed Deposit (FD) rates can fluctuate due to several factors:
Monetary Policy: Changes in central bank policies, such as adjustments to the repo rate, directly influence the FD rates set by financial institutions.
Inflation Rates: To counteract inflation, financial institutions may offer higher FD rates. Conversely, lower inflation can lead to reduced rates.
Market Competition: Financial institutions may alter FD rates to remain competitive and attract deposits, responding to changes in market conditions and competitor rates.
Liquidity Needs: Institutions adjust FD rates based on their need for liquidity. Higher rates may be offered to attract more deposits when funds are needed.
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