The government on Tuesday appointed three new external members including Ram Singh, Saugata Bhattacharya and Nagesh Kumar in the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI). The MPC has 6 members, out of which three are the central bank’s governor Shaktikanta Das, deputy governor Michael Patra and executive director Rajiv Ranj. Whereas, three external members are appointed by the central government for four years. Currently, the external members of the MPC are Professor Ashima Goyal, Professor Jayant Verma and New Delhi’s senior advisor Shashank Bhide. Their tenure is ending this week. Ram Singh is the director of Delhi School of Economics, Dr. Nagesh Kumar is the director and chief executive of the Institute for Studies in Industrial Development. Saugata Bhattacharya is an economist. MPC meeting will be held on 7-9 October
RBI’s Monetary Policy Committee meeting will be held on 7-9 October. A decision on the interest rate will be taken in this meeting chaired by Governor Shaktikanta Das. The last meeting was held in August, in which the committee did not change the rates for the 9th consecutive time. There is no expectation of change in interest rates in the meeting to be held in October. RBI Governor Shaktikanta Das will inform about the decisions of the meeting on October 9. This meeting is held every two months. RBI last raised rates by 0.25% to 6.5% in February 2023. US Federal Reserve cut interest rates by 0.5%
Earlier on September 18, the US Federal Reserve cut interest rates by 0.5%. After this cut after four years, interest rates fell to between 4.75% and 5.25%. America is the world’s largest economy, so every major decision of its central bank affects economies around the world. Since 2020, the Reserve Bank has raised interest rates by 1.10% in 5 times
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, did not make any 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. In India, there may be a cut of 0.50% by March 2025. Policy rate is a powerful tool to fight inflation. Any central bank has a powerful tool to fight inflation in the form of policy rate. When inflation is very high, the central bank tries to reduce the money flow in the economy by increasing the policy rate. If the policy rate is high, the loan that banks get from the central bank will be expensive. In return, banks make loans expensive for their customers. This reduces the money flow in the economy. When the money flow is low, demand decreases and inflation decreases. Similarly, when the economy goes through a bad phase, there is a need to increase the money flow for recovery. In such a situation, the Central Bank reduces the policy rate. Due to this, the loan that banks get from the Central Bank becomes cheaper and customers also get loans at cheaper rates.
