2. We Are Group No-06
Our Group Members
Are…
1.Abdulla Al Mamun-16MKT006
2.Polok Majumder-16MKT016
3.Sumaya Akter-16MKT026
4.Fahima Sultana Lima-16MKT036
5.Naim Islam-16MKT046
6.Pritom Sarker-16MKT056
7.Sabina Yasmin-16MKT066
8.Sharaful Islam-16MKT076
9.Md. Ahiduz-Zaman-16MKT086
10.Rimen Dewan-16MKT096
11.Sabbir Molla-16MKT106
3.
4. What is Monetary Policy ?
Monetary policy is how central banks manage
liquidity to create economic growth.
5. Objectives of Monetary Policy
Price stability
Currency stability
Growth in employment and income
Financial stability
6. Price stability
Price stability is the stable level of prices in
the economy, which avoids long periods of
inflation or deflation and sustains the value
of money over time.
7. Currency stability
Currency stability implies avoiding both prolonged
inflation and deflation.
Inflation is a rise in the in the general price level of
goods and services in an economy over a longer period
of time resulting in a decline in the value of money and
purchasing power. Deflation is a decrease in the
general price level of goods and services over a longer
period of time.
8. Growth in employment & Income
The relation between economic growth, social
progress and environmental protection represents a
key to development. Growth is not a means to an
end: it is designed to serve people, promote
development and reduce poverty.
Income is the engine that drives an economy
because only it can create demand.
9. Financial stability
Financial stability is a state in which the financial
system, i.e. the key financial markets and the
financial institutional system is resistant to
economic shocks and is fit to smoothly fulfil its
basic functions: the intermediation of financial
funds, management of risks and the
arrangement of payments.
10. Instrument of Monetary policy
• Bank rate policy
• Open market operation
• Variable reserve system
• Selective credit control
• Credit rationing
• Moral suasion
• Direct action
11. Bank Rate Policy
Bank rate policy refers to the interest rate at
which the domestic banks borrow money from a
nation's Central Bank based on the monetary
policy of the country as a short-term loan.
12. Open Market operation
An open market operation is an activity by a
central bank to give or take liquidity in its
currency to or from a bank or a group of banks.
13. Variable Reserve System
Variable reserve system or variable reserve ratio
is a straight and direct method of credit control. It
can give results more promptly than open market
operations. The cash reserves of a bank can be
altered by just a stroke of the pen.
14. Selective Credit Control
Selective credit control refers to qualitative
method of credit control by the central bank.
The method aims, unlike general or quantitative
methods, at the regulation of credit taken for
specific purposes or branches of economic
activity.
15. Credit Rationing
An action taken by lending institutions to limit
or deny credit based on borrowers'
creditworthiness and an overload of loan
demands.
An example of credit rationing is raising interest
rates about current market rate.
16. Moral Suasion
Moral suasion is used typically by making policy
announcements to induce the desired response,
before resorting to mandatory compliance
through statutory regulations.
17. Direct Action
Under this method if the Commercial Banks do
not follow the policy of the Central Bank, then
the Central Bank has the only recourse to direct
action. This method can be used to enforce both
quantitatively and qualitatively credit controls
by the Central Banks.
