The Reserve Bank of India (RBI) has hiked the key interest rate by 35 basis points to 6.25 percent. This is the second time in two months that the central bank has increased rates. The RBI had raised rates by 25 basis points in June, after keeping them unchanged for a year.
The latest hike comes as inflationary pressures continue to build in the economy. The RBI is now concerned that if it does not act to control inflation, it could spiral out of control.
The central bank has also revised its inflation forecast upwards for the rest of the year. It now expects inflation to average 4.8-5.0 percent in the second half of the fiscal year, compared to its earlier estimate of 4.7 percent.
Table of Contents
what is interest rate?
An interest rate is the percentage of an amount of money that is paid for its use over a period of time. It is usually expressed as an annual percentage rate (APR). The APR includes the interest rate and any other fees or charges associated with the loan, such as points or closing costs.
what is the effect if increase or decrease of interest rates?
The effect of interest rates on the economy is complex. A change in interest rates can have both positive and negative effects on different sectors. For example, a higher interest rate will make it more expensive for businesses to borrow money for investment, which can lead to slower economic growth.
However, a higher interest rate may also attract foreign investors, who will buy up local assets in search of higher returns. This can lead to an appreciation of the local currency, which can make exports more expensive and reduce economic growth.
what are the roles and responsibilities of RBI?
The Reserve Bank of India (RBI) is the central bank of India and plays a critical role in the country’s economy. Its main responsibilities include: – Regulating the country’s monetary policy – Managing the government’s currency reserves – Acting as a banker to the government and commercial banks – Overseeing the banking sector – Regulating and supervising financial institutions
How has the interest rate moved in recent years?
In recent years, the RBI has increased the interest rate by 35 basis points. This means that the RBI is now responsible for setting the interest rates in the country. The RBI uses this power to influence the country’s economic growth. The higher the interest rate, the more expensive it is for businesses to borrow money. This can lead to slower economic growth.
Conclusion
The RBI’s decision to raise interest rates by 35 basis points is a clear indication that the central bank is concerned about inflationary pressures in the economy. While the move will help to cool inflation in the short-term, it is likely to put pressure on growth in the coming quarters. The RBI has made it clear that it is ready to take further action if necessary, and so investors should remain cautious in the months ahead.