Inflation is the rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power.
The Reserve Bank of India (RBI) aims to maintain price stability while supporting economic growth. Its primary objective is to keep inflation around 4%, with a tolerance band of ±2%.
Repo Rate: The rate at which the RBI lends to commercial banks. Increasing the repo rate makes borrowing costlier, reducing spending and inflation.
The percentage of deposits banks must hold as reserves. Raising the CRR limits the funds available for lending, helping to control inflation.
The RBI buys or sells government securities in the open market to regulate money supply. Selling securities absorbs excess liquidity, helping to reduce inflationary pressures.
While controlling inflation, the RBI also considers economic growth. It strives to balance price stability with measures that support sustainable development.