Presentation    • OnMONETARY POLICYBy:- NIPUN NIKUNJ
OVERVIEW•   Introduction•   Characteristics•   Aim•   objective•   Major Players•   Types•   Operations of monitory policy...
Presentation     OnMONETARY POLICY     By: NIPUN NIKUNJ
What is Monetary Policy• The term monetary policy refers to actions taken by central  banks to affect monetary magnitudes ...
Continue….• Interest rates the key area of Monetary Policy• Basis of Monetary Policy is that there is a long run  relation...
Aims of Monetary policy• MP is a part of general economic policy of the  government• Thus MP contributes to the achievemen...
OBJECTIVES OF MONETARY POLICY Price stability Credit availability Stability of exchange rate Full employment High rat...
Price Stability: The Dominant Objective• There is convergence of views in developed and  developing economies, that price ...
Continue…• Price Stability contributes improvements in the  standard of living of people.• It promotes saving in the econo...
Major players                          Reserve Bank                           presidents                                  ...
Types of monetary policyThe distinction between the various types of monetary policy lies primarily withthe set of instrum...
Instruments of Monetary Policy• Variations in Reserve Ratios• Discount Rate (Bank Rate)  (also called rediscount rate)• Op...
RBI Annual Policy StatementThe Statement consists of two parts:  Part I. Annual Statement on Monetary Policy  for the Year...
Monetary policy Consists:-• The State of The Economy  Global Economy  Domestic economyInflationMonetary Aggregates
Monetary MeasuresRepo Rate under LAF- 7.75% (Decreased from 8.00%)Cash Reserve Ratio (CRR)- 4.00%(Decreased from 4.25%)...
Upcoming SlideShare
Loading in...5
×

Monetary policy

1,594

Published on

description of Monetary policy

0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
1,594
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
74
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide
  • Economic activity-the amount of buying and selling in the economy
  • Short-term interest rates set by the Monetary Policy Committee (MPC) of the Bank of EnglandMeets for 2 days each month to decide on rates
  • How central bank determines short term interest rates: toolsOpen market operationDiscount window leadingReserve requirements policyLending by the Central BankInterest RateDirect Credit ControlMoral SuasionPrudential GuidelinesExchange RateCurrency board
  • Monetary policy

    1. 1. Presentation • OnMONETARY POLICYBy:- NIPUN NIKUNJ
    2. 2. OVERVIEW• Introduction• Characteristics• Aim• objective• Major Players• Types• Operations of monitory policy• RBI annual policy statement 13
    3. 3. Presentation OnMONETARY POLICY By: NIPUN NIKUNJ
    4. 4. What is Monetary Policy• The term monetary policy refers to actions taken by central banks to affect monetary magnitudes or other financial conditions• Attempts to influence the level of economic activity through changes to the amount of money in circulation and the price of money – short-term interest rates• The money supply can/does influence price levels Inflation occurs if the money supply increases, ceteris paribus. Deflation occurs if the money supply decreases, ceteris paribus.
    5. 5. Continue….• Interest rates the key area of Monetary Policy• Basis of Monetary Policy is that there is a long run relationship between the amount of money and inflationMain circumstances:- (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest to attain a set of objectives oriented towards the growth and stability of the economy.
    6. 6. Aims of Monetary policy• MP is a part of general economic policy of the government• Thus MP contributes to the achievement of the goals of economic policy• MP also fulfill following aims also:- Full employment Stable exchange rate Economic growth Reasonable Price Stability Greater equality in distribution of income & wealth Financial stability
    7. 7. OBJECTIVES OF MONETARY POLICY Price stability Credit availability Stability of exchange rate Full employment High rate of economics growth Distribution of money
    8. 8. Price Stability: The Dominant Objective• There is convergence of views in developed and developing economies, that price stability is the dominant objective of monetary policy.• Price stability does not mean complete year-to- year price stability which is difficult to attain.• Price stability refers to the long run average stability of prices.• Price stability involves avoidance of both inflationary and deflationary pressures.
    9. 9. Continue…• Price Stability contributes improvements in the standard of living of people.• It promotes saving in the economy while discouraging unproductive investment.• Price stability leads to interest rate stability, and exchange rate stability (via export import stability).• It contributes to the overall financial stability of the economy.
    10. 10. Major players Reserve Bank presidents Federal Open Market Committee(FOMC) Direct open market operations Chair of the Board Advises on discount rate andBoard of Governors of GovernorsApproves discount reserve requirementsratesset reserverequirement 6 Governors of theDirects regulatory Boardoperations
    11. 11. Types of monetary policyThe distinction between the various types of monetary policy lies primarily withthe set of instruments and target variables that are used by the monetaryauthority to achieve their goals Monetary Policy: Target Market Variable: Long Term Objective:Inflation Targeting Interest rate on overnight debt A given rate of change in the CPIPrice Level Targeting Interest rate on overnight debt A specific CPI numberMonetary Aggregates The growth in money supply A given rate of change in the CPIFixed Exchange Rate The spot price of the currency The spot price of the currency Low inflation as measured byGold Standard The spot price of gold the gold price Usually unemployment + CPIMixed Policy Usually interest rates change
    12. 12. Instruments of Monetary Policy• Variations in Reserve Ratios• Discount Rate (Bank Rate) (also called rediscount rate)• Open Market Operations (OMOs)• Other Instruments
    13. 13. RBI Annual Policy StatementThe Statement consists of two parts: Part I. Annual Statement on Monetary Policy for the Year 2012-13; and Part II. Annual Statement on Developmental and Regulatory Policies for the Year 2012-13• First Quarter Review in July• Mid-term Review in October,• Third Quarter Review in January
    14. 14. Monetary policy Consists:-• The State of The Economy Global Economy Domestic economyInflationMonetary Aggregates
    15. 15. Monetary MeasuresRepo Rate under LAF- 7.75% (Decreased from 8.00%)Cash Reserve Ratio (CRR)- 4.00%(Decreased from 4.25%)Bank Rate- 8.75%(decrease from 9.0- previous quater)Statutory Liquidity Ratio (SLR)- 23%Reverse Repo Rate under LAF- 6.75%(Decreased from 7.00%)
    1. A particular slide catching your eye?

      Clipping is a handy way to collect important slides you want to go back to later.

    ×