Showing posts with label Monetary Policy stance :Accommodative. Show all posts
Showing posts with label Monetary Policy stance :Accommodative. Show all posts

Sunday, November 10, 2024

Monetary Policy stance :Accommodative,Neutral,Hawkish,Calibrated tightening

 

Monetary Policy stance: 

It is the standpoint of the central Bank /MPC. It can be accommodative, neutral hawkish and calibrated tightening.


Accommodative: 

An accommodative stance means the central bank is prepared to accommodate the increase in the money supply to boost economic growth in the next monetary policy announcement. The central bank, during an accommodative policy period, is willing to cut the interest rates. A rate hike is ruled out as it will be either no change or reduction . The central bank typically adopts an accommodative policy when growth needs policy support and inflation is not the immediate concern.

Neutral:

A ‘neutral stance’ suggests that the central bank can either cut rate or increase rate in future announcement. This stance is typically adopted when the policy priority is equal on both inflation and growth. During neutral policy, the central bank doesn’t commit to hike rates or cut. The interest rate can move to either sides depending on incoming data. 

Hawkish:

A hawkish stance indicates that the central bank’s top priority is to keep the inflation low. During such a phase, the central bank is willing to hike interest rates to curb money supply and thus reduce the demand. A hawkish policy also indicates tight monetary policy.

Calibrated tightening

Calibrated tightening means during the current rate cycle, a cut in the repo rate is off the table. But, the rate hike will happen in a calibrated manner. This means the central bank may not go for a rate increase in every policy meeting but the overall policy stance is tilted towards a rate hike. This can happen outside the policy meetings as well if the situation warrants.

 

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