In its first bi-monthly monetary policy for FY24-25, the Reserve Bank of India decided to keep the repo rate unchanged at 6.5 per cent. This comes after six consecutive rate hikes since May 2022. The decision, approved by a majority vote of 5:1, is expected to keep the momentum of residential real estate sales unimpeded. While prices in the top 7 cities have risen steadily, the unchanged repo rate will provide a much-needed breather to home loan borrowers.
Repo Rate: A Key Monetary Policy Tool
The repo rate is a crucial interest rate set by the Reserve Bank of India (RBI) at which banks can borrow money from the RBI. It is a key monetary policy tool used by central banks to regulate money supply and influence economic growth.
Repo Rate Decision in FY24-25
In its first bi-monthly monetary policy for FY24-25, the RBI decided to maintain the repo rate at 6.5%. This decision marks a pause after six consecutive rate hikes since May 2022. The decision was made by a 5:1 majority vote.
Rationale for Unchanged Repo Rate
The RBI's decision to keep the repo rate unchanged was driven by several factors:
Impact on Real Estate Sector
The unchanged repo rate is expected to have a positive impact on the real estate sector:
FAQs
1. What is the impact of an increase in repo rate?
An increase in the repo rate makes borrowing more expensive for banks, which may pass on the increased costs to customers in the form of higher interest rates on loans.
2. What is the purpose of the repo rate?
The repo rate is used by central banks to control inflation, manage money supply, and influence economic growth.
3. How is the repo rate decided?
The repo rate is determined by the central bank based on various factors, such as inflation, economic growth, and global financial conditions.
4. Why did the RBI pause rate hikes in FY24-25?
The RBI paused rate hikes to support economic growth, moderate inflation, and provide relief to home loan borrowers.
5. What are the potential risks of an unchanged repo rate?
An unchanged repo rate could lead to higher inflation if economic growth accelerates and demand outpaces supply.
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