Monetary policy tools are the policy instruments used by banks to achieve monetary policy objectives. The main monetary policy tools are: reserve requirements, interest rates, rediscounting, loans, open market operations, window guidance, and exchange rate policies.
1. Reserve for deposits
Reserve requirement, also known as the reserve ratio, is the ratio of the deposits deposited by commercial banks in ** banks in accordance with regulations to the deposits they absorb. The size of this ratio is very important for the operation of the bank. Because reserves are a cost for banks, by adjusting the reserve requirement ratio, the scale of credit of banks can be controlled, which in turn affects the amount of money in the market. When the bank raises the reserve requirement ratio, it means that the commercial bank must deposit more funds in the bank, which will reduce the liquidity of the commercial bank and reduce the scale of credit, thereby reducing the amount of money in the market. On the contrary, it will increase the amount of currency in the market.
Second, interest rate policy
Interest rate policy is one of the core components of monetary policy. By adjusting interest rates, banks affect the market's borrowing costs and demand for money, thereby regulating economic growth and inflation. When the economy grows too fast or inflation is too high, banks may raise interest rates, increase borrowing costs, and discourage investment and consumption; Otherwise, it will lower interest rates and stimulate investment and consumption.
3. Rediscount policy
The rediscount policy refers to the fact that the bank adjusts the rediscount rate to affect the discount behavior of the commercial bank, which in turn affects the amount of money in the market. When the ** bank increases the rediscount rate, it means that the cost of the commercial bank to discount the bill to the ** bank increases, which will make the commercial bank reduce the discount behavior, thereby reducing the amount of money in the market. On the contrary, it will increase the amount of currency in the market.
Fourth, open market operations
Open market operations refer to the buying and selling of bonds by banks on the open market in order to influence the amount of money in the market. When a bank buys a bond, it injects money into the market and increases the amount of money in the market; Otherwise, it will reduce the amount of currency in the market. This mode of operation has great flexibility and is one of the most important tools in the operation of modern monetary policy.
5. Window guidance
Window guidance refers to the communication between the first bank and the commercial bank to guide their credit behavior in order to achieve the monetary policy goal. The specific methods of window guidance may include: encouraging or restricting loans in certain industries, adjusting the interest rate level of certain loans, etc. Although the window guidance does not have legal effect, it has important reference significance for commercial banks.
6. Exchange rate policy
Exchange rate policy refers to the measures taken by banks to influence the level of exchange rates by intervening in the foreign exchange market. **Banks usually take direct intervention or adjust exchange rate policies to affect the supply and demand of the foreign exchange market, maintain exchange rate stability or achieve specific exchange rate policy objectives according to the domestic and foreign economic situation and the balance of payments. The main purpose of exchange rate policy is to promote international** and investment development, while at the same time protecting against foreign exchange risk and capital outflows.
The above is the main content of monetary policy tools. The application of these monetary policy tools needs to be flexibly adjusted according to the economic situation and market conditions. In practice, banks usually consider the use of various monetary policy tools to achieve the expected monetary policy objectives based on changes in macroeconomic indicators such as economic growth, inflation, and employment. Search Topic Full Time Challenge in January