![]() The main instruments are the policy interest rates, open market operations (OMOs) and the statutory reserve ratio (SRR). The CBSL possesses a wide range of tools to be used as instruments of monetary policy. What are the instruments used by the CBSL to conduct its monetary policy? In terms of operational aspects of this framework, the Central Bank uses its policy instruments to guide short term interest rates, particularly the average weighted call money rate (AWCMR) as the operating target. At present, the Central Bank conducts monetary policy in line with a flexible inflation targeting (FIT) framework, aimed at stabilising inflation at mid single digit levels over the medium term while supporting economic growth to reach its potential. Monetary policy conducted under a flexible inflation targeting (FIT) framework is aimed at stabilising inflation around the inflation target while minimising disturbance to the real economy. What is flexible inflation targeting (FIT)? What is the current monetary policy framework of the CBSL?Īt present, the Central Bank conducts monetary policy in line with a flexible inflation targeting (FIT) framework, aimed at stabilising inflation at mid single digit levels over the medium term while supporting economic growth to reach its potential. The primary function of the MPC is to evaluate emerging monetary and macroeconomic developments and make recommendations on the appropriate stance of monetary policy for the consideration of the Monetary Board. The Monetary Policy Committee (MPC) of the CBSL, chaired by the Governor, is responsible for providing monetary policy recommendations to the Monetary Board. The Monetary Board is the monetary policy decision making body in Sri Lanka. ![]() In Sri Lanka, the authority responsible for the formulation and implementation of monetary policy is the Central Bank of Sri Lanka (CBSL). Who is responsible for the conduct of monetary policy? Monetary policy is the process by which the central bank influences the cost (interest) and availability of money (money supply/liquidity) with a view to attaining price stability. Frequently Asked Questions (FAQs) Monetary Policy
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