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RBI Increased The Repo Rate
The RBI increased the repo rate by 50 basis points while Governor Shaktikanta Das remained optimistic about domestic growth. He said that the domestic economic recovery is getting more broad-based despite many uncertainties on the global front.
RBI Repo Rate as on 06th Aug 2022
|Reverse Repo Rate||3.35%|
|Marginal Standing Facility Rate||5.15%|
RBI Repo Rate Hike Last 2 Years
|Effective Date||Repo Rate||%Change|
|5 August 2022||5.40%||0.5%|
|8 June 2022||4.90%||0.5%|
|09 Oct 2020||4.00%||0.00%|
|06 Aug 2020||4.00%||0.00%|
Stock Market Impact After RBI Repo Rate Hike
- The Sensex was up over 250 points while the Nifty hovered near 17,500 levels.
- The Nifty Bank index was up 1% and holding above 38,000 levels.
Currency Market Impact After RBI Repo Rate Hike
- Indian rupee today rose to 79.23 per US dollar compared to the previous close of 79.47.
- Indian rupee today rose to 80.79 per Euro compared to the previous close of 81.12.
Impact on Bond Market
Indian government bond yields rose today after the central bank raised its key policy rate by 50 basis points to tame high inflation. The RBI also kept its both inflation and GDP growth outlook steady.
The 10-year bond yield was at 7.2588%, rising from 7.1073% earlier in the day. The MPC retained its GDP growth projection for 2022/23 at 7.2%, while its inflation forecast remained unchanged at 6.7%.
Q.1- How Does Repo Rate Work?
Ans: As mentioned earlier, the repo rate is used by the central bank of India to control the flow of money in the market. When the market is hit by inflation, RBI increases the repo rate. An increased repo rate denotes that the banks who borrow money during this period from the central bank will have to pay higher interest. This discourages the banks to borrow money, which in turn, reduces the supply of money in the market and helps negate inflation. Similarly, the repo rates are decreased in the case of a recession.
Q.2- How Does RBI Calculate Repo Rate?
Ans: On the basis of the economic condition, as discussed in the last paragraph, the RBI regulates the repo rate. The rates are decided by the central bank on the basis of the inflation or recession in the market of the country.
Q.3- What effect does Repo Rate has on the life of a common man?
Ans: The effect of the repo rate on the life of the common man is direct in terms of the increase in the overall interest. As discussed earlier, the repo rate is the rate of interest which is charged by the RBI for funds lent to commercial banks.