For instance, liquidity is important for an economy to spur growth.To maintain liquidity, the RBI is dependent on the monetary policy.
Define accommodating monetary policy
In the United States, the Congress established maximum employment and price stability as the macroeconomic objectives for the Federal Reserve; they are sometimes referred to as the Federal Reserve's dual mandate.
Apart from these overarching objectives, the Congress determined that operational conduct of monetary policy should be free from political influence.
As a result, the Federal Reserve is an independent agency of the federal government.
Using any of these instruments will lead to changes in the interest rate, or the money supply in the economy.
Monetary policy can be expansionary and contractionary in nature.
Increasing money supply and reducing interest rates indicate an expansionary policy.
The reverse of this is a contractionary monetary policy.
Monetary policy is the macroeconomic policy laid down by the central bank.
It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.