The meeting of the Monetary Policy Committee to take a decision on interest rates has started today i.e., 4 December. Reserve Bank of India (RBI) Governor Shaktikanta Das will announce the decision taken in the meeting on 6 December at 10 am. RBI has kept the repo rate unchanged at 6.5% since February 2023. Market analysts and economists expect the central bank to maintain its current stance to bring India’s inflation closer to its target level. The MPC has 6 members, three of whom are central bank governor Shaktikanta Das, deputy governor Michael Patra and executive director Rajiv Ranjan. The government has appointed three new external members including Ram Singh, Saugata Bhattacharya and Nagesh Kumar to the committee on October 1. The last meeting of the Monetary Policy Committee was held in October
The last meeting of the Monetary Policy Committee was held in October, in which the committee did not change the rates for the 10th consecutive time. Now no change in interest rates is expected in this meeting as well. This meeting is held every two months. Reserve Bank raised interest rates by 1.10% in 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 raised interest rates 5 times, did not make any change four times and once cut it by 0.50% in August 2022. Before Kovid, the repo rate was at 5.15% on 6 February 2020. 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 received by the banks from the central bank will be expensive. In return, banks make loans expensive for their customers. Due to this, the money flow in the economy decreases. When the money flow decreases then the demand decreases and inflation goes down. Similarly, when the economy goes through a bad phase then 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 the banks get from the Central Bank becomes cheaper and the customers also get loans at a cheaper rate.
