Repo rate is an interest rate charged by Central bank(RBI in India) for lending money to other banks. The current repo rate in India is 8%. The bank lend money to the public based on these repo rates charged by the central bank. RBI increases and decreases repo rate to control the Inflation. The hike in inflation made RBI to increase the repo rate from 7.25% to 8 % (dated 27/7/2011).The given below fig. describes,how hike in repo rate affects inflation.

In the above fig. describes how the repo rate hike lowers the inflation , it is the duty of RBI to control the inflation.