The graph given below indicates the changes in key policy rates made by the Central Bank several times in a year: ![73](https://d39jluplm5thpx.cloudfront.net//CSAT_2018_Q73_0d8a1dbf7e.png) Which one of the following can be the most likely reason for the Central Bank for such an action?

Encouraging both public and private savings

Question

CSATMediumPrelims 2018Reasoning

The 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?

Explanation

When the Central Bank raises policy rates, it is typically a strategy to withdraw liquidity from the system, often in response to expectations of rising inflation. Therefore, a consistently increasing repo rate signals an anti-inflationary stance. Hence, option D is correct.