What Are the Different Instruments of Monetary Policy?

Monetary policy instruments are the means adopted by the central bank to achieve monetary policy goals. Monetary policy tools are divided into general tools and selective tools. For a long time in the past, China's monetary policy has focused on direct regulation, that is, the use of credit scales, cash plans and other tools. After 1998, indirect monetary policy tools were mainly adopted to regulate the total money supply. At this stage, China's monetary policy tools mainly include open market operations, deposit reserves, reloans and rediscounts, interest rate policies, exchange rate policies, window guidance, short-term liquidity adjustment tools (SLO), and medium-term borrowing facilities (MLF). On November 6, 2013, the central bank's website added a "Standby Lending Facility (SLF)" section, and officially released this year's standing lending facility, marking the official use of this new monetary policy tool.

Monetary policy tools

Right!

In order to achieve its ultimate goal, there is a transmission mechanism and a time process. Generally, the central bank uses

according to

People's Bank of China can use

Reform of China's Deposit Reserve System

(One),

The "money shortage" in the financial market reflects problems in the operation of the Chinese banking industry. They have long relied on the country's investment expansion policy to become the biggest profitees who rely on credit expansion to sit on the deposit and loan spread. After the country began to abandon investment expansion policies and promote economic transformation, this single model of banks relying on deposit and loan interest margins to be profitable has been challenged. In particular, the country's long-term tightening monetary policy has made banks' lives worse and worse, and eventually Multiple factors are brought together to produce a superimposed effect, and a rare "money shortage" crisis has erupted. ^[2]

What the Chinese banking industry is hoping for is that the central bank will change its monetary policy to lower the quota or interest rate once to ease market liquidity so that they can continue to rely on the original economic growth model to "happily survive." However, this time the central bank did not wish the bank. Some economic data was lower than expected, indicating that the economic trend was not very optimistic. However, the central bank did not open the gate as quickly as it used to.

The main goal of monetary policy is to stabilize the value of money. However, for a long time, China s monetary policy has been highly distorted as a tool to promote economic growth. In order to keep pace with GDP growth, China has embarked on a path of currency expansion. The currency has been seriously devalued after it has been severely overspent, which directly affects people s living standards improve.

Therefore, the central government's efforts to promote economic transformation should naturally include correction of the misuse of previous monetary policies. However, this has touched on the vested interests of a group that relied on the original growth model to form such a wave of "compulsive market conditions."

In the future economic transformation, events such as this institution's monetary policy game with the central bank will often occur. The reason is that there is a money shortage in the banking industry, and there will be other reasons we never imagined.