Reserve Bank of India (RBI) in its 51st Monetary Policy Committee (MPC) meeting kept the Repo Rate unchanged at 6.5%. This is the tenth straight time when the key rate has been kept unchanged. The Decision was announced by RBI Governor Shaktikanta Das in monetary policy statement on Wednesday.
The Meeting was kicked-off on Monday and notably, the MPC has maintained status quo on 6.50% interest rate since February 2023.
RBI MPC: What Is Monetary Policy?
Central banks all around the globe use monetary policy to manage economic fluctuations and achieve price stability. It aims to keep inflation low and stable, according to International Monetary Fund (IMF). “Central banks conduct monetary policy by adjusting the supply of money, usually through buying or selling securities in the open market,” says IMF. Notably, open market operations affect short-term interest rates. It influence longer-term rates and economic activity.
“When central banks lower interest rates, monetary policy is easing. When they raise interest rates, monetary policy is tightening,” says IMF.
How Repo Rate Impacts Common People?
The Repo rate in simple terms is the rate for banks to borrow funds from the Central bank. An increase in interest rates potentially makes the borrowing more expensive. This might impact consumer spending and business investment adversely. Higher interest rates can make home loans expensive for people. This could lead to decrease in the demand for housing.
To be precise, the decision on repo rate impacts the borrowing/loan costs for the individuals and businesses. An increase in repo rate can make loans costlier, whereas a decrease in repo rate potentially makes the loans cheaper.
It is worth noting that status quo will not much impact the borrowers in terms of EMIs as of now. Meanwhile, the central bank has changed its monetary policy stance of ‘withdrawal of accommodation’ to ‘neutral’.
Also Read: RBI Monetary Policy Meeting: Repo Rate Kept Unchanged For The Tenth Straight Time
