16. Monetary Policy
Monetary policy is the
term used by economists
to describe ways of
managing the supply of
money in an economy.
17. Monetary Policy
According to Macconal:
"Changing the money supply to
assist the economy to achieve
a full employment "
18. Use of Monetary Policy
Central Bank can use three tools
to achieve its monetary policy
goals: the discount rate, reserve
requirements, and open market
operations. All three affect the
amount of funds in the banking
system. The discount rate is the
interest rate Reserve Banks
charge commercial banks for
short-term loans.
19. Objectives of Monetary policy
Objectives are classified in two
aspects:
Developed Countries
Under Developed
Countries
20. Developed Countries
To have high aggregate demand without inflation
Eradicate inflationary and deflationary gap
High research / further development Providing assistance to other
countries Gaining monetary control over others
21. Under Developed
Countries
To achieve full employment
To have high efficiency
To have large scale of
resource mobilization
To increase exports
To have high investment
To provide price and
exchange stability
To have efficient allocation
and utilization of resources
22. Interest Rate
• An interest rate is the price of
borrowing money.
• When banks lend money, they expect
to be repaid the amount they rent,
which is called the principle and a
percentage of the principle to cover
inflation and to make some profit.
28. Money Supply.
• Bank manipulates interest rate by changing the money supply.
• If the bank increases the money supply, there'll be plenty of
money for banks to loan out.
• Banks will be forced to lower interest rates because they are
gonna have to complete or else no ones gonna borrow from
them.
• And decrease in money supply has the opposite effect.
29. Expansionary Monetary Policy
if the central bank
wants to speed up
the economy, they
can increase the
money supply with
will decrease
interest rate, and
lead to more
borrowing and
spending. that's
called expansionary
monetary policy.
30. Contractionary monetary policy
if the central bank
wants to slow
down the economy,
they decrease the
money supply -
less money,
available will
increase interest
rates and decrease
spending. that's
called
contractionary
monetary policy.
32. Problems :
unemployment
and deflation.
Remedy :
Induce an expansion
in the supply of
money, and
therefore expending,
by reducing the
interest rate.
Means:
Buy bonds
in the open
market.
Expansionary monetary policy
34. Healthy banking system
There Are Two Things That Keep The Banking System
Healthy
1. Confidence
2. Liquidity
When Customers Deposit Money In A Bank, They Need To
Feel Confident They Are Gonna Get Their Money Back.
39. Speed Up Or Slow Down Economy.
• Fiscal policy
• Momentary policy.
Fiscal policy which is changing government spending or
taxes and
Momentary policy which is changing the money supply.
41. Monetary policy :
Bangladesh Bank
• Monetary Policy Archive.
Bangladesh Bank half yearly
Monetary Policy Statements
outline the monetary policy
stance, designed to support
government's policies and
programs in pursuit of faster
inclusive economic growth and
poverty reduction; while also
maintaining price stability.
42. Economic Growth And
Poverty Reduction
• Bangladesh Bank Said The
Half-yearly Monetary Policy
From July To December 2017
Is Designed To Support The
Government's Policies And
Programs In Pursuit Of Faster
Inclusive Economic Growth
And Poverty Reduction
43. Inflation
• Balancing The Output And
Inflation Risks For The
Economy Over The Next One
Year, The Program Will Target
Monetary Growth Path Aimed
At Keeping Average Inflation
Around 5.5 Percent
44. Exchange Rate
• According to the bank's
statement, the market-based
exchange rate of taka has
responded to the turnaround of
BoP (Balance of Payment)
current account balance from
surplus to deficit in FY17,
depreciating by around 3
percent against U.S. dollar.