RBI Monetary Policy Committee meeting from today: Interest rate may decrease by 0.25%, currently RBI repo rate at 5.50%

The meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is starting today i.e. from 3rd December. This meeting will continue till December 5 and the decisions taken in it will be announced on the same day. In this meeting of RBI’s MPC, interest rates can be cut by 0.25%. Currently the repo rate of RBI is at 5.50%.

If this happens, loan and interest rates may reduce slightly, which may provide relief to common people and businessmen. This could be a good sign for the economy. Because this will make loans cheaper and business will get a boost. It has been said in the report that at present inflation is completely under control and it is expected to reduce further.

Repo rate reduced 3 times this year, cut by 1% RBI had reduced the interest rates from 6.5% to 6.25% in the meeting held in February. This cut was made by the Monetary Policy Committee after about 5 years.

For the second time in the meeting held in April, the interest rate was reduced by 0.25%. Rates were cut by 0.50% for the third time in June. That is, the Monetary Policy Committee reduced interest rates by 1% thrice. However, no changes were made in the two meetings held thereafter.

What will change due to reduction in repo rate? After reducing the repo rate, banks can also reduce their interest rates on loans like housing and auto. All your loans can become cheaper and EMI will also reduce. If interest rates decrease, housing demand will increase. More people will be able to invest in real estate.

Why does the Reserve Bank increase and decrease the repo rate? 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.

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