RBI's Monetary Policy Committee (MPC) is a six-member panel that determines the repo rate.
This panel consists of the RBI governor, deputy governor, one RBI officer appointed by the govt, and professors.
The panel meets at least 4 times a year and takes action to achieve RBI's inflation target.
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Update
The three-day Monetary Policy Meeting (MPC) concluded today. The Reserve Bank of India (RBI) governor Shaktikanta Das increased interest rates by 0.5% as inflation remains elevated. More details below
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Relevance of today’s RBI hiking the Repo Rate by 50 bps to 5.4%?
Repo Rate:The interest rate at which the banks borrow from the RBI.
Increasing the Repo rate will:
- Decentivize the banks to borrow from RBI, resulting in reduction of money supply to the economy.
- This reduction in money supply will help control inflation.
Since there is still a scope for rates to be increased further. How can you use the news to invest?
Debt Funds: As debt fund returns carry inverse relationship with interest rates. The situation is not yet conducive for debt funds investments,specifically the long term debt.
Equity:Focus on the sectors that benefits from inflationary trends and companies having pricing power & ability.
Do you know which sectors and companies benefit during inflationary trends in economy?
You
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