Monetary policy is the policy of the Central Bank, influencing the cost and availability of money by using various policy instruments to realise certain economic objectives. It is the defining function of central banks including the RBI. Monetary Policy can influence macroeconomic activities like savings, total credit supply, investment, economic growth etc. Similarly, it can be used to stabilise and guide the economy. Because of this importance vis a vis the government’s fiscal policy, believers of monetary policy call it as ‘the only game in the town’.
