Today (7 June) i.e. Friday is the last day of the meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI). RBI Governor Shaktikanta Das will give information about the decisions taken in this meeting going on from June 5 in a press conference this evening. According to experts, no change is expected in the repo rate i.e. interest rate in this meeting as well. This is the second meeting of the financial year 2024-25. Currently the repo rate remains at 6.50%. RBI had not increased the interest rates in the earlier meeting held in April as well. RBI had last raised the rates by 0.25% to 6.5% in February 2023. Monetary Policy Committee meets every two months RBI’s Monetary Policy Committee meets every two months. RBI’s MPC has six members. It has both external and RBI officials. Along with Governor Das, RBI officials Rajiv Ranjan serves as Executive Director and Michael Debabrata Patra is the Deputy Governor. Shashank Bhide, Ashima Goyal and Jayant R Verma are external members. In the financial year 2022-23, the repo rate was increased by 2.50% in 6 times. The first meeting of the financial year 2022-23 was held in April-2022. Then RBI kept the repo rate stable at 4%, but RBI called an emergency meeting on 2 and 3 May and increased the repo rate by 0.40% to 4.40%. This change in the repo rate happened after 22 May 2020. After this, in the meeting held from 6 to 8 June, the repo rate was increased by 0.50%. This increased the repo rate from 4.40% to 4.90%. Then in August it was increased by 0.50%, due to which it reached 5.40%. In September, the interest rates became 5.90%. Then in December the interest rates reached 6.25%. After this, the last monetary policy meeting of the financial year 2022-23 was held in February, in which interest rates were increased from 6.25% to 6.50%. Inflation rise stopped RBI Governor Shaktikanta Das had said about inflation that ‘Elephant (inflation) has now gone out for a walk and heading to the forest’ i.e. the rise in inflation has now stopped. At the same time, he had estimated inflation to be 4.5% and real GDP growth to be 7% in the financial year 2024-25. Repo rate is a powerful tool to fight inflation RBI has a powerful tool to fight inflation in the form of repo rate. When inflation is very high, RBI tries to reduce the money flow in the economy by increasing the repo rate. If the repo rate is high, the loan that banks get from RBI will be expensive. In return, banks make loans expensive for their customers. This reduces the money flow in the economy. If the money flow is low, then the demand decreases and inflation decreases. Similarly, when the economy goes through a bad phase, there is a need to increase the money flow for recovery. In such a situation, RBI reduces the repo rate. This makes the loan that banks get from RBI cheaper and customers also get loans at a cheaper rate. Let us understand this with an example. During the Corona period, when economic activity came to a standstill, there was a decrease in demand. In such a situation, RBI had increased the money flow in the economy by reducing interest rates. What happens when the reverse repo rate increases or decreases? Reverse repo rate is the rate at which RBI pays interest to banks for keeping money. When RBI has to reduce liquidity from the market, it increases the reverse repo rate. Banks take advantage of this by receiving interest for their holding with RBI. During high inflation in the economy, RBI increases the reverse repo rate. This reduces the funds with banks to give loans to customers. RBI also released inflation and GDP estimates in February, know what the inflation figures say? 1. Retail inflation 4.83% in April Retail inflation has come down to 4.83% in April 2024. This is the lowest level of inflation in 11 months. It was 4.81% in June 2023. At the same time, a month ago i.e. in March 2024, the inflation rate was 4.85%. RBI’s range regarding inflation is 2%-6%. In the ideal situation, RBI would like retail inflation to remain at 4%. 2. Wholesale inflation rate 1.26% in April Wholesale inflation has increased to 1.26% in the month of April. This is the highest level of inflation in 13 months. Earlier in March 2023, the wholesale inflation rate was 1.34%. Inflation has increased due to increase in the price of food items. At the same time, a month before this, in March 2024, it was 0.53%. At the same time, wholesale inflation was 0.20% in February and 0.27% in January. How does inflation affect? Inflation is directly related to purchasing power. For example, if the inflation rate is 7%, then the value of Rs 100 earned will be only Rs 93. Therefore, one should invest keeping inflation in mind. Otherwise, the value of your money will decrease.
