What is the objective of monetary policy?

The objective of price stability has been highlighted during the twenties and thirties of the present century. In fact, economists like Crustar Cassels and Keynes suggested price stabilization as a main objective of monetary policy. Price stability is considered the most genuine objective of monetary policy.

How do central banks implement monetary policies?

Central banks use various tools to implement monetary policies. The widely utilized policy tools include: 1. Interest rate adjustment A central bank can influence interest rates by changing the discount rate. The discount rate (base rate) is an interest rate charged by a central bank to banks for short-term loans.

What are monetary policy strategies?

Monetary policy strategies include revising interest rates and changing bank reserve requirements. Monetary policy is commonly classified as either expansionary or contractionary. The Federal Reserve commonly uses three strategies for monetary policy including reserve requirements, the discount rate, and open market operations.