Repo Rate

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Source: CMIE Economic Outlook, 1 Finance Research

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What does the Repo Rate data represent?

The Repo rate represents the rate at which the Reserve Bank of India (RBI) lends money to commercial banks in the event of any shortfall of funds.

Repo rate is a key monetary policy instrument and is adjusted by the monetary authorities to manage inflation within its target range and maintain economic stability.
The repo rate directly affects the interest rates charged by banks to customers for loans. Changes in the repo rate can influence the overall economic activity by making borrowing cost more or less expensive for banks.
Changes in the repo rate can impact economic growth and the money supply in the economy.
The repo rate can impact equity markets, as changes in borrowing costs affect corporate profits and investor sentiment.

Changes in the repo rate affect the banking sector, particularly in terms of lending rates and credit availability. A higher repo rate makes borrowing costlier, while a lower rate makes it cheaper. Lower rates encourage spending and investment and boost economic growth, whereas higher rates can slow down these activities.
A lower rate increases the money supply, while a higher rate restricts it.
Lower rates can lead to bullish market trends, while higher rates might cause bearish sentiment.
The trends in the repo rate helps to understand the central bank's monetary policy stance and the correlation between key economic indicators such as GDP growth, inflation rates, and demand for bank credit.