0
Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which our banks borrow rupees from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive.
Hence, When the repo rate is hiked, the bank gets loan at a higher interest rate from RBI, and henceforth Banks give loan to retail customer/ corporate customer at a more higher rate, so demand for the loan from the customers of bank decreases decreases and there is less money in the market.
Since, the liquidity of the marked is sucked by increasing Repo Rate, public can't afford to pay more for any particular commodity, and hence the inflation of the economy gets controlled.
Wiki User
∙ 10y ago
Add your answer:
Earn +20 pts
What monetary policy tool is considered an expansionary tool?
Decreasing the discount rate.
What is tools of monetary policy?
The principal tool is the discount rate (the rate the Federal Reserve System charges banks).
What is the Fed's oldest policy tool?
The Federal Reserve does not have one tool that is more important over another when it comes to monetary policy. There are three tools and all three are equally important. The three tools are open market operations, discount rates, and reserve requirements.
A tool often used by the Federal Reserve to stimulate borrowing and spending is to?
decrease the discount rate to banks-decrease the discount rate to banks.(:
What tool of monetary policy will the Federal Reserve use to increase the federal funds rate from 1 percent to 1.25 percent?
the discount rate
Can repo men enter some one elses property to reposses a tool box?
not really
What kind of tools does a repo man use?
A repo man uses tools that can break locks and chain up moveable assets. A common tool for every repo man is the tow truck. The truck needs chains, lifts and a pulley system to work effectively.
Can is the function of a CPI calculator?
A CPI calculator calculates inflation, it utilizes the Consumer Price Index, which is a tool for monitoring the changes in costs of household items, thus tracking inflation.
Can you tell me what a CPI calculator does?
A CPI calculator calculates inflation, it utilizes the Consumer Price Index, which is a tool for monitoring the changes in costs of household items, thus tracking inflation.
What monetary policy tool is considered an expansionary tool?
Decreasing the discount rate.
What is the definition of tool control in school?
bordness
What command tool is widely used and accepted tool for command control and coordination of a response to a disaster?
Incident Command System is a widely used and accepted tool for command, control, and coordination of a disaster response.
Which tool promotes all 4 values for xp projects in agile?
Visual Control tool
What is tools of monetary policy?
The principal tool is the discount rate (the rate the Federal Reserve System charges banks).
What tool to use when measuring rate?
you can measure rate with how big or long or how much something improves in a certain amount of time
What is control m in mainframe technology?
Control-m is a tool for scheduling and monitoring jobs in mainframe technology
What is the Fed's oldest policy tool?
The Federal Reserve does not have one tool that is more important over another when it comes to monetary policy. There are three tools and all three are equally important. The three tools are open market operations, discount rates, and reserve requirements.
