Скачать или смотреть Understanding Reverse repo rate : A key monetary policy tool or What is reverse repo rate?

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The reverse repo rate is the rate at which the central bank (like the Federal Reserve in the U.S. or the Reserve Bank of India) borrows money from commercial banks. When the central bank wants to reduce the money supply in the economy, it raises the reverse repo rate. This encourages commercial banks to park their excess funds with the central bank in exchange for a safe, short-term return.

Here’s a breakdown of how it works:

1. Commercial Banks and the Central Bank: Commercial banks have excess funds, which they lend to the central bank through the reverse repo mechanism. The central bank, in return, pays interest at the reverse repo rate.


2. Impact on Money Supply: When the central bank raises the reverse repo rate, it becomes more attractive for banks to lend money to the central bank rather than giving out loans to the public. This reduces the amount of money circulating in the economy, which can help to control inflation.


3. Policy Tool: It’s a key part of the central bank’s monetary policy toolkit, helping control liquidity in the financial system by adjusting rates according to the economic conditions.



In contrast, the repo rate is the rate at which the central bank lends money to commercial banks.