One of the key tools at the disposal of the MPC is the policy interest rate, known as the repo rate. By adjusting this rate, the central bank can influence borrowing costs for individuals and businesses. In an effort to combat inflation, the MPC may opt to raise the repo rate. This move discourages borrowing and spending, which can help cool down an overheated economy and reduce price pressures.
Furthermore, the MPC can also employ other measures, such as open market operations and reserve requirements, to manage liquidity in the banking system and curb inflation. These tools can affect the amount of money available in the economy, which in turn impacts consumer spending and business investment.
Additionally, the central bank will closely monitor various economic indicators, including consumer price inflation, food and fuel prices, and inflation expectations, to make informed decisions regarding its monetary policy stance.
Source:- the times of indiaIt’s important to note that the MPC’s commitment to bringing inflation under control is not only aimed at maintaining price stability but also at fostering sustainable economic growth. Excessive inflation can erode the purchasing power of consumers and undermine economic stability, making it crucial for the central bank to take measures to align inflation with its target.
Source:-cnbctv18In conclusion, the MPC, under the leadership of Shaktikanta Das, stands ready to employ a range of monetary policy tools to address the challenge of inflation and steer the Indian economy toward a path of stability and growth while aiming to achieve the RBI’s 4% inflation target
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