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Question
______ formulates the Monetary Policy in the economy.
Options
Commercial Banks
International Monetary Fund
Central Bank
Central Government
Solution
Central Bank formulates the Monetary Policy in the economy.
Explanation:
The Central Bank (RBI in India) is a country's apex monetary authority. It has sole jurisdiction in the country to create and implement monetary policy.
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| On 30th September 2022, the Reserve Bank of India (RBI) raised Repo Rate for the fourth time in a row. The Monetary Policy Committee (MPC) decided to raise the policy rate by 50 basis points `(1 "basis point" =1/100 "th of a percent")`. After this announcement, the new repo rate stands at 5.9%, while the reverse repo rate continues to stand at 3.35%. Commercial banks borrow money from the Central Bank, when there is a shortage of funds. With the surge in the repo rate, borrowings by general public will become costlier. This is because, as RBI hikes its repo rate, it becomes costly for the banks to borrow short term funds from the Central Bank.
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