Monetary Economics

Step 1: Understanding the Concept:
This question asks for a specific numerical value related to monetary policy adjustments made by the central bank.
Step 2: Detailed Explanation:
The paragraph concludes by discussing inflation management. It states: "The central bank has raised the repo rate by 190 basis points in four instalments since May 2022..."
In financial terms, 100 basis points equal 1 percentage point (1%). Therefore, a 190 basis point hike is equal to an increase of 1.9% in the interest rate.
Step 3: Final Answer:
The total increase in the repo rate since May 2022 is 190 basis points.

Step 1: Understanding the Concept:
"Repo" stands for Repurchasing Option. It is a quantitative tool used by the central bank to control the money supply and inflation in the economy.
Step 2: Detailed Explanation:
Commercial banks borrow from the RBI by selling government securities with an agreement to buy them back (repurchase) at a future date at a predetermined price.
1. To Curb Inflation: The RBI increases the Repo Rate. This makes borrowing expensive for banks, who then increase their lending rates. This reduces demand and slows down inflation.
2. To Boost Growth: During a recession, the RBI lowers the Repo Rate. This makes loans cheaper, encouraging businesses and consumers to spend and invest.
It is usually a short-term lending rate.
Step 3: Final Answer:
Repo rate is the benchmark interest rate at which the Reserve Bank of India lends liquidity to commercial banks against the collateral of government securities.

Step 1: Understanding the Concept:
Repo rate is a tool of monetary policy used by the central bank to control liquidity and inflation in the economy.
Step 2: Detailed Explanation:
- When the central bank increases the Repo Rate, it becomes more expensive for banks to borrow money.
- This leads to higher interest rates for consumers, reducing money supply and controlling inflation.
- Conversely, a lower Repo Rate encourages banks to borrow more and lend more to the public, stimulating economic growth.
It is a short-term lending rate.
Step 3: Final Answer:
Repo rate is the interest rate at which commercial banks borrow short-term funds from the Reserve Bank of India.