How does the RBI control inflation and deflation?

By Ritesh|Updated : September 3rd, 2022

To prevent inflation and deflation, the RBI employs a variety of monetary policy tools.

  • Repo Rate
  • Reverse Repo Rate
  • Bank Rate
  • Open Market Operations
  • Statutory Liquidity Ratio (SLR)
  • Cash Reserve Ratio (CRR)
  • Liquidity Adjustment Facility (LAF)
  • Market Stabilisation Scheme.

The control of inflation is one of the RBI's primary duties. The RBI adjusts interest rates to control inflation.

  • Prices cease growing, and inflation levels down as consumers cut back on their spending.
  • Deflation, on the other hand, offers the RBI room to lower interest rates.

Role of RBI in Controlling Inflation and Deflation

The practice of accounting for inflation is crucial to financial planning. Here are a few strategies for retiring while accounting for inflation.

Long-term investments should be made:

Spending money now on investments can enable you to profit from inflation in the future when it comes to long-term investments.

Invest More:

More money than one might think is needed for retirement. Increasing savings or aggressive investments are the two methods to reach retirement goals.

Make a variety of investments:

Invest in different portfolios even though bond investing alone feels safer. To outpace inflation, don't put all your eggs in one basket.

Summary:

How does the RBI control inflation and deflation?

The Reserve Bank of India (RBI) uses several monetary policy tools to combat inflation and deflation. The RBI wants to make loans more expensive by raising interest rates on loans, which will deter borrowers from borrowing and deter them from spending.

Comments

write a comment

Featured Articles

Follow us for latest updates