The monetary policy committee meeting to decide on interest rates has started today i.e. December 4. The Reserve Bank of India ie RBI Governor Shaktikanta Das will announce the decision taken in the meeting on December 6 at 10 am.
RBI has kept the repo rate unchanged at 6.5% from 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 Rajeev Ranjan. The government appointed three new external members to the committee on October 1. Including Ram Singh, Saugat Bhattacharya and Nagesh Kumar.
The last meeting of the Monetary Policy Committee was held in October The Monetary Policy Committee last met in October, with the committee leaving rates unchanged for the 10th time in a row. Now no change in interest rates is expected in this meeting as well. This meeting is held every two months.
RBI hiked interest rates 5 times since 2020 by 1.10% Reserve Bank of India (RBI) cut interest rates twice by 0.40% during Corona (27 March 2020 to 9 October 2020). After this, in the next 10 meetings the central bank raised interest rates 5 times, left it unchanged four times and cut it once by 0.50% in August 2022. Pre-Covid repo rate was 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 too high, the central bank tries to reduce the flow of money into the economy by raising policy rates.
If the policy rate remains high, the loans that banks get from the central bank will become expensive. Banks in turn make loans more expensive for their customers. This reduces the flow of money in the economy. If the flow of money decreases, demand decreases and inflation decreases.
Similarly, when the economy goes through a bad phase, the recovery needs to increase the flow of money. In such a situation, the central bank reduces the policy rate. Because of this, the loans from the central bank become cheaper for the banks and the customers also get loans at cheaper rates.
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