Economics
What is Repo Rate?
The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks - India's primary tool for controlling inflation and economic growth. The US equivalent is the Federal Funds Rate set by the Federal Reserve's FOMC.
Formula
Set by RBI's Monetary Policy Committee (MPC) every 2 months. US equivalent (Fed Funds Rate) is set by the FOMC eight times a year.
How to Interpret
Lower repo rate = cheaper borrowing = stimulates growth but may increase inflation. Higher repo rate = controls inflation but slows growth. The same logic applies to the Fed Funds Rate in the US, both rates anchor bank lending and bond yields in their respective regions.
Typical Ranges
India repo rate: historically 4–8%. US Fed Funds Rate: historically 0–6% (currently in a similar restrictive zone). Both drive bank lending rates and bond yields.