Step-by-step explanation:
The Reserve Bank's decision to increase the policy repo rate is typically aimed at controlling inflation and promoting economic stability. When inflation is high, the Reserve Bank may increase the policy repo rate to reduce the demand for credit and slow down economic growth, which in turn helps to reduce inflationary pressures.
In this case, the Reserve Bank increased the policy repo rate three times in 2022, with increases of 40 bps, 50 bps, and 50 bps respectively. The likely cause behind these rate hikes was to control credit creation in the economy, which can lead to inflation if left unchecked. By raising interest rates, the Reserve Bank aims to reduce the demand for credit, which can help to cool down the economy and bring inflation under control.
The consequences of these rate hikes can be mixed. On one hand, higher interest rates can make it more expensive for businesses and individuals to borrow money, which can slow down economic growth. On the other hand, higher interest rates can also make saving more attractive, which can help to reduce inflation and stabilize the economy in the long run.
Overall, the Reserve Bank's decision to raise the policy repo rate reflects its ongoing efforts to promote economic stability and control inflation, and the consequences of these rate hikes will depend on a range of factors, including the strength of the economy, the level of inflation, and the behavior of consumers and businesses.