One must remember that the RBI hikes the repo rate to control inflation. In the event of a rate cut, it is an indication of overall prices of products in the economy being under control. RBI’s rate cut will bring in further good news for consumers. As a lowered interest rate makes it even more flexible for companies to borrow at a cheaper rate from banks. Not only they, but even your home loan, personal loan and vehicle loan interest rate may also get eased, hence your EMIs will become cheaper. (Image: Reuters)
For everyday consumers, the first thing to note is that RBI's policy positioning depends upon the Consumer Price Index (CPI) or retail inflation of the country. RBI decides the repo rate, in line with performance of CPI which has a major impact on purchasing and selling power. (Image: Reuters)
When inflation is low, they make prices of goods and services rise at slower space. Products India becomes more competitive in comparison to international prices - this in return helps in improvement of the country’s trade balance via rise in exports.
Firms also prefer low inflation, because then it makes it very easier for them in making more investment and which reveals in future costs, prices and wages. If prices change at a slower rate, this gives ample of time to firms in spending less time and energy on updating prices of your goods.
Even savings see a jump in this scenario, as banks will be in better position to offer you real rate of return on your savings. (Image: Reuters)
If prices of products are stable, this means lower expenses for common man and more investment from them which adds another value to economic growth. On the similar lines, if prices are stable there is rise in demand in a goods and services which helps the earnings of firms. (Image: Reuters)
Finally, low inflation makes your income rise, as nominal wage growth is constant in the period. (Image: Reuters)