Repurchase agreement rate (repo rate)

Repurchase agreement rate (repo rate) - interest rate, which is used in repo transactions. Repo transactions imply transactions with securities with the obligatory presence of the seller's obligation to repurchase the security from the buyer after a certain period of time and at a certain price.

In fact, a repo transaction is a short-term loan against securitiesalthough it is executed as a sale-purchase transaction. It is expressed as a percentage per annum.

High repo rates have a negative effect on the growth rate of lending to consumers and a positive effect on the growth of savings, which, in turn, leads to a slowdown in economic growth. As a rule, an increase in repo rates causes an inflow of capital into the economy and a strengthening of the national currency. However, if it has no basis in the form of high rates of economic growth, it may result in the beginning of the process of stagnation economy, as well as a long-term negative impact on the position of the national currency.