Repo Rate - Definition

Repo rate (also known as Repurchase Rate) is the official rate of borrowing from central banks. Repo rates are used to control Liquidity within a country as part of its Monetary Policy and come into play when banks borrow money from the National or Federal Reserve.

For example, when the Federal Reserve wants to increase the supply of money in the country, the Central Bank decreases the repo rate allowing banks to borrow money from the Central Bank or Federal Reserve at a lower rate. As a corollary to reduce liquidity (during times of higher than acceptable Inflation) the repo rate is increased. This reduces the Money Supply in the market as borrowing rates rise.

Repo rate is a term commonly used in economic and financial circles of India. Here the Reserve Bank of India (RBI) controls it, where a reduction in the repo rates help banks borrow money at a cheaper rate, while an increase makes borrowing more expensive.



Terms near "Repo Rate"

Repurchase Agreement (REPO)
Reserve Bank of Australia (RBA)
Reserve Currency
Reserves
Resistance
Resource Driver
Resources
Retail Prices Index (RPI)
Retail Sales
Revaluation
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