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The US Federal Reserve raised the federal funds target range by 25 basis points to 3.75%-4% on 16 September 2026, in a unanimous 12-0 FOMC vote.
It is the Fed's first hike since July 2023 and the first policy move under Chair Kevin Warsh, who took office in May 2026.
16 of 18 officials projected another hike by end-2026; the Fed raised its 2026 PCE inflation projection to 3.7%, with a return to the 2% goal seen only in 2029.
India's RBI held the repo rate at 5.25% in August 2026; its next MPC meeting is on 5-7 October 2026, with higher crude prices and a Fed hike raising pressure on the rupee and inflation.
US central bank, created by the Federal Reserve Act, 1913
Sets the federal funds rate target; 12 voting members
Sets India's repo rate; 6 members (3 RBI, 3 Centre-nominated)
Created the Fed; mandates maximum employment and stable prices (the 'dual mandate')
Centre sets the inflation target (CPI 4% ± 2%); MPC fixes the policy repo rate
General Awareness > Monetary policy, central banks
GS Paper 3 > Indian Economy: monetary policy, external sector
General Awareness > Economy
Consider the following statements: 1. Tight monetary policy of US Federal Reserve could lead to capital flight. 2. Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs). 3. Devaluation of domestic currency decreases the currency risk associated with ECBs. Which of the statements given above are correct?
Answer: 1 and 2 only
If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?
Answer: Increase the Marginal Standing Facility Rate
Consider the following statements: Statement-I : In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes. Statement-II : Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means. Which one of the following is correct in respect of the above statements?
Answer: Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
The terms 'Marginal Standing Facility Rate' and 'Net Demand and Time Liabilities', sometimes appearing in news, are used in relation to
Answer: banking operations
With reference to Indian economy, consider the following: 1. Bank rate 2. Open market operations 3. Public debt 4. Public revenue Which of the above is/are component/ components of Monetary Policy?
Answer: 1 and 2
Overnight rate at which US banks lend reserves to each other; the Fed's main policy target
One-hundredth of a percentage point; 25 bps = 0.25%
Chart of each FOMC participant's projected policy rate for coming years
Personal Consumption Expenditures price index — the Fed's preferred inflation gauge, targeted at 2%