How Changes in the Repo Rate Influence Economic Stability and Growth - Delhi

The repo rate, or repurchase rate, is the interest rate at which a country's central bank lends money to commercial banks. It is a critical monetary policy tool used to control inflation, manage liquidity, and influence overall economic activity. When the central bank raises the repo rate, borrowing becomes more expensive for banks, leading to higher interest rates for consumers and businesses. This can help curb inflation but may slow economic growth. Conversely, lowering the repo rate makes borrowing cheaper, stimulating spending and investment but potentially increasing inflation. Understanding the repo rate's impact is essential for informed financial and investment decisions.