Monetary Policy¶

Definition of Monetary Policy¶

Monetary policy is a macroeconomic policy managed by the central bank.
It involves managing money supply and interest rates to achieve various macroeconomic goals, such as controlling inflation, promoting growth, and ensuring financial stability.

Types of Monetary Policy 1. Expansionary Monetary Policy * Aimed at stimulating economic growth and increasing aggregate demand. * Tools include lowering interest rates, open market operations, reserve requirement reductions, and quantitative easing.

Contractionary Monetary Policy
- Implemented to reduce inflationary pressures and cool down an overheating economy.
- Tools include raising interest rates, open market operations, reserve requirement increases, and sterilization operations.

Instruments of Monetary Policy¶

Various instruments used by the RBI, including open market operations, cash reserve ratio (CRR), statutory liquidity ratio (SLR), bank rate policy, credit ceiling, Market Stabilisation Scheme (MSS), Liquidity Adjustment Facility (LAF), and more.

Objectives of Monetary Policy in India¶

"Growth with Stability" is the primary objective, balancing economic growth with price stability.
Regulation, supervision, and development of financial stability.
Promoting the priority sector, employment generation, and external stability.
Encouraging savings and investments.
Redistributing income and wealth.
Regulation of Non-Banking Financial Institutions (NBFIs).

Role of Monetary Policy¶

The primary goal is to maintain price stability by controlling inflation, which is essential for sustainable growth.

RBI Monetary Policy 2023 Highlights¶

Repo rate remains unchanged at 6.5% for FY 2023-24.
GDP growth rate projections for different quarters.
Inflation projection for the year.

Overall, your description provides a comprehensive understanding of the monetary policy framework in India, its objectives, and the various tools and instruments used by the RBI to achieve its goals.

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