Monetary policy, that is, financial policy, refers to various principles, policies and measures adopted by the People's Bank of China to control and regulate the money supply and credit quantity in order to achieve its specific economic goals.

The essence of monetary policy is that the country's money supply adopts different policy trends such as "tight", "loose" or "moderate" according to the economic development in different periods.

Main tools:

1. deposit reserve ratio); Policy;

2. rediscount policy;

3. Open market operation.

Extended data

Exchange rate stability is one of the goals of the central bank's monetary policy. From the perspective of RMB exchange rate, the important influence of exchange rate stability on the stability of a country's financial environment and the smooth operation of its economy need not be described in detail. However, the continuous depreciation of RMB exchange rate will naturally bring capital outflow pressure, which will further affect the stable operation of the financial environment, which is not conducive to steady economic growth and structural transformation. Therefore, protecting the exchange rate is not to sacrifice the domestic economy, but to create conditions for the stable operation of the domestic economy.

20 18, 18 10 on 7 October, the central bank announced that it would continue to take necessary measures to stabilize market expectations and keep the foreign exchange market running smoothly. This explanation also illustrates the central bank's concern about the current RMB exchange rate. In the short term, the effect of capital controls on exchange rate stability is acceptable, and the effect of offshore central bank bills needs to be observed. However, foreign exchange control is not a long-term solution. In the long run, interest rates are still needed to guide the release of pressure.

The quantitative easing policy of the central bank can achieve two major goals by purchasing a large number of assets from the market and releasing liquidity.

First, it can lower long-term interest rates, thus stimulating private consumption and corporate investment. Private consumption and enterprise investment are the most important to any country's economy. Without them, the economy cannot grow.

Second, releasing liquidity by purchasing assets through quantitative easing can increase the reserves of commercial banks and financial institutions. The central bank can purchase assets held by commercial banks, increase their reserves, and encourage commercial banks to issue loans to enterprises and individuals to increase their credit, thus stimulating enterprise investment and personal consumption.

Resources Baidu Encyclopedia-Monetary Policy