Inflation & Monetary Policy Ppts03

8/6/2019 Inflation & Monetary Policy Ppts03

1/20

Presented by:Abhinandan Mehrotra (04)Amanpreet Kaur (19)Anukriti (28)Ashwani Anand (40)Disha Gupta (52)

1


2/20

2


3/20

Negative Effects .

Decrease in real value of money .Balance trade is disturbed in casetrading is in between economies .Inflation also causes hoardings of goods .

3


4/20

4


5/20

5


6/20

Ex cessive growth of money supply causes hyper inflation .

IT is attributed by government with increase in currency incirculation in the country .

Fluctuation in real demand of goods and services .

6


7/20

Monetary policy is all aboutmanipulation of interest rate to control

the level of inflation .

Its aim is to maintain price stability .

7


8/20

Monetary policy implies that an interestrate hike of let x % is suppose to bring

down inflation to y%

So the question arises how does

adjusting interest rates affects the outputgap, thereby encouraging pricestability?

8


9/20

Monetary policy rest on relationshipbetween the rates of interest in an

economy and the total supply of money

Monetary policy uses a variety of tools to

affect economic growth , inflation , etc.

9


10/20

1 . INCREASE IN BANK RATES:An increase in bank rates leads to anincrease in the interest rate charged bycommercial banks which in turndiscourages borrowing by businessmen

and consumers

10


11/20

2 . SALE OF GOVERNMENT SECURITIES:

By selling government securities in open market , the

central bank directly reduces the cash reserves of thecommercial banks .

The fall in the cash reserves compelsthe banks to reduce their leading activities .

This will reduce the money supply andhence the inflationary pressures in the economy .

11


12/20

3 . HIGHER RESERVE RATIO:An increase in the minimum reserve ratiomeans that the member banks arerequired to keep larger reserves with thecentral bank .

This reduces the depositsof banks andthus limits their power to create credit .

12


13/20

4 . SELECTIVE CREDIT CONTROL:The purpose of selective credit controlmeasures is to influence specific type ofcredit while leaving other type of creditunaffected .

13


14/20

Creeping InflationGalloping InflationHyperinflationStagflationDeflation

14


15/20

Q uantitative measures Q ualitative measures

15


16/20

Q uantitative measures includes: Bank rate Open market operation . C ash reserve ratio .

16


17/20

Q ualitative measures includes: Margin instrument . Moral suasion . Direct action . C redit rationing .

17


18/20

W ith the help of this project we canconclude that the increase in general level

of price of goods & services is known asInflation .It has negative as well as positive impactson the people & in the economy also .

Inflation is caused due to fluctuation in realdemand of goods & services also e xcessivegrowth of money supply caused byHyperinflation .

18


19/20

It can be controlled with help of monetarypolicy upto some e xtent by adopting

certain qualitative & quantitative measuressuch as bank rate,cash reserve ratio, creditrationing etc .

Reserve repo rate:Increase the repo rate under the LiquidityAdjustment Facility (LA F) by 25 basis pointsfrom 5 .0 per cent to 5 .25 per cent withimmediate effect .

19


20/20

20

Documents

Inflation & Monetary Policy Ppts03