How Central Bank Control Money.

Monetary policy is the main policy of central of bank, which has been playing role to achieve goal for sustainable growth of economy stable and price stable. Excess of money or shortage of money in market, both conditions are not favourable situation for economic activities. That’s why central bank should have been controlling to both unfavourable situation by applied monetary policy. Without monetary policy, government cannot achieve their target goal of fiscal policy. It is mainly related with how to increase money in market if market suffers by less money and how money would be taken from market if market suffers by excess money. 

If market suffers by less money, then consumptions, new investment, production and employment would be decreased in economy, which is not good for economy, so that central bank should have been playing role to increase for money supply in market by applied some actions. That’s why central bank increases money supply, decreases interest rate, ease credit facilities, decrease reserve percentage of commercial bank , decreases SLR, decrease bank rate. buying  treasury bill,bonds from banks  and etc. After applying all actions by central bank, money supply in market would be increased. Then all economy activities would-be run-in normal ways. 

If market suffers by excess money, then demand of goods and foreign currency, price of all goods and services would be increased, this situation called inflation that situation is not good for stable economy activities, central bank should take action to control excess money from market. That’s why central bank decrease money supply by increasing reserve percentage of central bank, SLR,  and bank rate, tighten credit facility, issue bond, issue treasury bill,  after applying these actions, excess money would be decreased from market and come to normal situation. Without monetary policy, excess and lack of money in market, cannot be controlled by central bank. These all mechanisms are conducted by central bank regarding money in economy are called monetary policy. 

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