Mumbai The Monetary Policy Committee meeting of the Reserve Bank of India will be held on October 7-9. The decision on 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. No change in interest rates is expected in the meeting to be held in October.
RBI Governor Shaktikanta Das will give information about the decisions of the meeting on October 9. This meeting takes place every two months. RBI last increased rates by 0.25 percent to 6.5 percent in February 2023. Earlier on September 18, the US Federal Reserve had cut interest rates by 0.5 percent. After this reduction made after four years, the interest rates were between 4.75 percent to 5.25 percent. America is the largest economy in the world, hence every major decision of its Central Bank impacts the economies around the world.
The Reserve Bank of India cut interest rates by 0.40 percent twice during Corona. After this, in the next 10 meetings, the Central Bank increased interest rates 5 times, made no change four times and once cut it by 0.50 percent in August 2022. Before Covid, the repo rate was at 5.15 percent on 6 February 2020.
Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said India could see a rate cut of 0.50 per cent by March 2025. RBI has not made any change in interest rates after 8 February 2023. Currently the repo rate is 6.50 percent. Vijay Bharadiya, Founder, Wallfort Financial Services Ltd, said the rate cut is a bold step that could encourage other global central banks, including the Reserve Bank of India (RBI), to adopt a softer monetary stance.
Any central bank has a powerful tool to fight inflation in the form of the policy rate. When inflation is very high, the Central Bank tries to reduce money flow in the economy by increasing the policy rate. If the policy rate is high then the loan that banks get from the Central Bank will be expensive. In return, banks make loans costlier for their customers. This reduces money flow in the economy. If money flow decreases, demand decreases and inflation decreases. Similarly, when the economy goes through a bad phase, there is a need to increase money flow for recovery. In such a situation, the Central Bank reduces the policy rate. Due to this, the loan received by the banks from the Central Bank becomes cheaper and the customers also get the loan at a cheaper rate.