Forums
Back
Monetary policy
Economics
What do you mean by neutrality of monetary policy
Answers (4)
There are three stances of Monetary Policy namely Hawkish(RBI will increase rate to keep inflation in check), Neutral and accommodative (Cut rates to boost growth). Neutral suggests that central bank can go sideways depending on the data. Can cut rates and increase as well.
Himanshu Somani
There are three stances of Monetary Policy namely Hawkish(RBI will increase rate to keep inflation in check), Neutral and accommodative (Cut rates to boost growth). Neutral suggests that central bank can go sideways depending on the data. Can cut rates and increase as well.
PS : You may expect that the current status of withdrawal of accommodation to be changed to neutral stance in the upcoming MPC meeting.
Himanshu Somani
There are three stances of Monetary Policy namely Hawkish(RBI will increase rate to keep inflation in check), Neutral and accommodative (Cut rates to boost growth). Neutral suggests that central bank can go sideways depending on the data. Can cut rates and increase as well.
Can you please explain in a more clear way
Thread Starter
Pandusml VCan you please explain in a more clear way
When inflation is high RBI raises rates to increase cost of borrowing thereby reducing money supply thereby reducing demand and thereby reducing prices - when you raise rates you are said to be hawkish - hawk soars high in the sky When inflation is low and growth is also low , RBI reduces rates to induce liquidity in the economy - this is called being dovish - Doves are peaceful birds and do not siad high in the sky When RBI does not decide either way i.e to raise rates or reduce rates they are said to be neutral
Your Reply