Monetary Policy of Central Bank Inflation Targeting PDF

BA FM31P (A) MONETARY POLICY OF CENTRAL BANK INFLATION TARGETING Group 3: Carpio, Alyssa Marie A. Golosinda, Hannahvila B. Melchor, Emil Lawrence T....

BA FM31P (A) MONETARY POLICY OF CENTRAL BANK INFLATION TARGETING Group 3: Carpio, Alyssa Marie A. Golosinda, Hannahvila B. Melchor, Emil Lawrence T. Valencia, Kate Marie Cybel Villegas, VicmanVincent A.  Monetary Policy is measures or actions taken by the central bank to regulate the money supply in the economy. It aims to stabilize the price level by influencing the timing, costs, and availability of money and credit, as well as other financial factors. Key objectives of monetary policy include: Price Stability Full Employment Economic Growth ensuring inflation remains at a promoting a high level of supporting sustainable low and stable level employment economic growth  Inflation Targeting The primary objective of the BSP's monetary policy is “to promote price stability conducive to a balanced and sustainable growth of the economy” (Republic Act 7653). The adoption of inflation targeting framework of monetary policy in January 2002 is aimed at achieving this objective. To achieve the inflation target, the BSP uses a suite of monetary policy instruments in implementing the desired monetary policy stance, depending on its assessment of the outlook for inflation. The reverse repurchase (RRP) or borrowing rate is the primary monetary policy instrument of the BSP.  Standard Tools Used to Implement Monetary Policy INTEREST RATES OPEN MARKET OPERATIONS RESERVE REQUIREMENTS by adjusting interest rates, buying or selling government changing the amount of central banks can influence securities in the open market can money banks must hold in borrowing costs and affect the money supply reserve can influence consumer spending lending activity  Contractionary Policy vs Expansionary Policy Contractionary Monetary Policy Expansionary Monetary Policy > If the BSP perceives the inflation > if the BSP sees the inflation forecast forecast to exceed the target. to be lower than the target. > to bring down inflation to its target > to increase liquidity in the financial path. system.  01 Hyperinflation prices skyrocket by more than 50% per month. Levels of Galloping Inflation is when inflation Inflation 02 rises 10% or more Inflation is the rate at which the 03 Walking Inflation is the inflation rate between 3% to 10%. overall level of prices for various goods and services in an economy rises over a period of time. 04 Creeping Inflation is a type of inflation that occurs slowly and gradually. 05 Deflation is a situation in which prices are decreasing.  Thank You Hopefully, this year's report can make our class even better.