What are the different currency policy tools?

monetary policy is the result of an attempt by the main bank in the economy to control the results of the economy using these policies. Therefore, currency policy tools include the tools or methods by which the central bank achieves these goals. The bank's goal may be to start an economy stopped or may be a slowdown economy that is too active for any level of sustainability. To this end, the central bank can use interest rates, reserves, loans, instructions and free market operations.

One of the currency policy instruments is interest rates, which is a reference to interest rates that such a bank charges other banks from the money that disappears. The central bank is able to use an interest rate to achieve its purpose, because any manipulation of the central bank interest rate is transmitted by other consumer banks. Assuming the central bank seeks to reduce the rate of consumption in the economy PR economyBy applying higher interest rates, other banks will transfer this burden to consumers who will no longer have easy access to financing for different purchases. It will also cause more consumers to save money due to an increase in the interests paid by banks from saving deposits. In this way, the central bank is able to reduce the amount of money they circulate in the economy.

Another inclusion in monetary policy instruments is reserves in which the central bank can make the other banks to increase or reduce the summary reserve they have with the central bank. Banks usually have part of their assets as reserves with a central bank and leave only a certain fraction for use as liquid cash. When the central bank increases or reduces the percentage of reserve requirements, it will also affect the ease of Wikter consumers can raise funds from banks.

Instructions from central banks to other banks are another integration into monetary policy instruments. The leadership of banks hasUsually a part of the discretion, which usually applies to the operation of their financial institutions. The use of instructions reporting targets that the central bank seeks to achieve and order banks to follow them will remove part of this freedom from banks.