New Delhi2 hours ago
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Today i.e. 9th October is the last day of the meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India i.e. RBI. The decision on interest rate will be taken in this meeting chaired by RBI Governor Shaktikanta Das. The Governor will give information about the decisions taken in the meeting today.
According to experts, there is no change in the repo rate this time too. The last meeting of the Monetary Policy Committee was held in August, in which the committee did not change the rates for the 9th consecutive time. This meeting takes place every two months. RBI last raised rates by 0.25% to 6.5% in February 2023.
US Federal Reserve cuts interest rates by 0.5%
Earlier on September 18, the US Federal Reserve had cut interest rates by 0.5%. After this reduction made after four years, the interest rates ranged between 4.75% to 5.25%. America is the largest economy in the world, hence every major decision of its Central Bank impacts the economies around the world.
Reserve Bank increased interest rates by 1.10% 5 times since 2020
The Reserve Bank of India (RBI) cut interest rates by 0.40% twice during Corona (27 March 2020 to 9 October 2020). After this, in the next 10 meetings, the Central Bank increased interest rates 5 times, made no change four times and once cut it by 0.50% in August 2022. Before Covid, the repo rate was at 5.15% on 6 February 2020.
There may be a reduction of 0.50% in India by March 2025
- Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said India could see a rate cut of 0.50% by March 2025. RBI has not made any change in interest rates after 8 February 2023. Currently the repo rate is 6.50%.
- Vijay Bharadiya, Founder, Wallfort Financial Services Ltd, said the rate cut is a bold step that could encourage other global central banks, including the Reserve Bank of India, to adopt a softer monetary stance.
Policy rate is a powerful tool to fight inflation
Any central bank has a powerful tool to fight inflation in the form of the policy rate. When inflation is very high, the Central Bank tries to reduce money flow in the economy by increasing the policy rate.
If the policy rate is high then the loan that banks get from the Central Bank will be expensive. In return, banks make loans costlier for their customers. This reduces money flow in the economy. If money flow decreases, demand decreases and inflation decreases.
Similarly, when the economy goes through a bad phase, there is a need to increase money flow for recovery. In such a situation, the Central Bank reduces the policy rate. Due to this, the loan received by the banks from the Central Bank becomes cheaper and the customers also get the loan at a cheaper rate.
