BANKING AFFAIRS

Detailed explanation-1: -Monetary policy is a set of tools used by a nation’s central bank to control the overall money supply and promote economic growth and employ strategies such as revising interest rates and changing bank reserve requirements.

Detailed explanation-2: -The Fed uses three primary tools in managing the money supply and pursuing stable economic growth. The tools are (1) reserve requirements, (2) the discount rate, and (3) open market operations. Each of these impacts the money supply in different ways and can be used to contract or expand the economy.

Detailed explanation-3: -Monetary policy in the United States comprises the Federal Reserve’s actions and communications to promote maximum employment, stable prices, and moderate long-term interest rates–the economic goals the Congress has instructed the Federal Reserve to pursue.

Detailed explanation-4: -The primary tool the Federal Reserve uses to conduct monetary policy is the federal funds rate-the rate that banks pay for overnight borrowing in the federal funds market.

Detailed explanation-5: -The 6 tools of monetary policy are reverse Repo Rate, Reverse Repo Rate, Open Market Operations, Bank Rate policy (discount rate), cash reserve ratio (CRR), Statutory Liquidity Ratio (SLR).