Why REPO rate is being hiked to control Inflation ?
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Answer Posted / renuka
REPO RATE IS THE RATE AT WHICH CENTRAL BANK OF A COUNTRY LENDS LOANS TO COMMERCIAL BANKS.. BY HIKING THE REPO RATE THE COMMERCIAL BANKS WILL GET LOANS AT HIGHER INTEREST RATE FROM CENTRAL BANK AND THUS THEY WILL PROVIDE LOANS TO THEIR CUSTOMERS AT HIGH INTEREST RATE.. THIS WILL DECREASE THE FLOW OF MONEY IN THE MARKET AND PEOPLE WILL NOT BUY MORE PRODUCTS. THUS, THE DEMAND IN THE MARKET WILL DECREASE AND IT WOULD HELP IN CONTROLLING INFLATION..
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