REPO RATE Meaning and
Definition
-
The repo rate is an abbreviation for repurchase rate, which is an important parameter used in the monetary policy of a country. It is defined as the rate at which central banks lend money to commercial banks for a short-term period, usually overnight, to meet their liquidity requirements. In other words, it refers to the interest rate at which the central bank purchases government securities from commercial banks, thereby injecting liquidity into the banking system.
The repo rate serves as a tool for the central bank to control inflation and stabilize the economy. When the central bank increases the repo rate, it becomes more expensive for commercial banks to borrow money, leading to a decrease in the money supply. This reduction in liquidity helps control inflation by curbing excessive borrowing and spending. Conversely, when the central bank decreases the repo rate, it becomes cheaper for commercial banks to borrow money, stimulating economic activity and boosting borrowing and spending, which can help combat deflationary pressures.
The repo rate also influences other interest rates in the economy, including lending rates for individuals and businesses. As the repo rate serves as a benchmark for borrowing costs, changes in this rate by the central bank can have a cascading effect on interest rates across various sectors of the economy.
Overall, the repo rate acts as a vital tool for central banks to manage monetary policy, control inflation, and promote stability in the financial system.
Common Misspellings for REPO RATE
- eepo rate
- depo rate
- fepo rate
- tepo rate
- 5epo rate
- 4epo rate
- rwpo rate
- rspo rate
- rdpo rate
- rrpo rate
- r4po rate
- r3po rate
- reoo rate
- relo rate
- re-o rate
- re0o rate
- repi rate
- repk rate
- repl rate
- repp rate
Etymology of REPO RATE
The term "repo rate" is a financial term that originated in the field of economics and finance. It is an abbreviation of the phrase "repurchase agreement rate".
The word "repurchase" refers to an arrangement between two parties, usually a central bank and a commercial bank, where the central bank agrees to sell securities to the commercial bank with an agreement to repurchase them at a later date. This repurchase agreement acts as a short-term loan for the commercial bank, providing liquidity.
The word "rate" simply refers to the interest rate at which this transaction takes place. The repo rate is the interest rate charged on these repurchase agreements.
Overall, the etymology of "repo rate" comes from combining "repurchase agreement" and "rate" as a concise and commonly used term in the finance industry.
Infographic
Add the infographic to your website:
