Asian Journal of Research in Banking and Finance
  • Year: 2012
  • Volume: 2
  • Issue: 3

Does the repo rate really control inflation?

  • Author:
  • N. Suresh
  • Total Page Count: 6
  • Page Number: 79 to 84

Department of Commerce  M V S Government Degree College  Mahaboob Nagar

Online published on 16 March, 2012.

Abstract

It has become the common practice of Reserve Bank of India to rotate the repo rate in very frequent intervals to stabilize the supply of money and to curtail the pressures of inflation. The prudence of RBI certainly works when the inflation is caused due to the mounting pressures of demand side economies. But the bank rates can hardly yield any benefits if the inflation is cost pulled and stands to be the residual of supply side problems. It could be the reason why the consumer price index of the country has been sending alarming signals of proliferating inflation and making the repo rate a destitute of positive effects. So, this paper makes a preliminary attempt to discuss whether, the repo rate succeeds in managing inflation. Or, is there any need to find the formidable path of mitigating undesired rate of inflation.