Question
Download Solution PDFThe graph given below indicates the changes in key policy rates made by the Central Bank several times in a year:
Which one of the following can be the most likely reason for the Central bank for such an action?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFCalculations:
From July '2' to June '16' it is almost one year. In this duration repo rate and reverse repo rate is going to increase continuously Wherever CRR is fixed. This only happens to control the inflation in the market. So whenever the central bank resists the policy rate, it is a way to suck out liquidity from the system. Normally this is due to the central bank expectation of rising inflation. Hence a continuously rising repo rate indicates an anti-inflationary stance.
∴ Option 4 is correct
Last updated on Jun 30, 2025
-> UPSC Mains 2025 Exam Date is approaching! The Mains Exam will be conducted from 22 August, 2025 onwards over 05 days!
-> Check the Daily Headlines for 30th June UPSC Current Affairs.
-> UPSC Launched PRATIBHA Setu Portal to connect aspirants who did not make it to the final merit list of various UPSC Exams, with top-tier employers.
-> The UPSC CSE Prelims and IFS Prelims result has been released @upsc.gov.in on 11 June, 2025. Check UPSC Prelims Result 2025 and UPSC IFS Result 2025.
-> UPSC Launches New Online Portal upsconline.nic.in. Check OTR Registration Process.
-> Check UPSC Prelims 2025 Exam Analysis and UPSC Prelims 2025 Question Paper for GS Paper 1 & CSAT.
-> UPSC Exam Calendar 2026. UPSC CSE 2026 Notification will be released on 14 January, 2026.
-> Calculate your Prelims score using the UPSC Marks Calculator.
-> Go through the UPSC Previous Year Papers and UPSC Civil Services Test Series to enhance your preparation