1. Controlling inflation: A prudent monetary policy requires the central bank to pay close attention to the inflation rate and maintain price stability by adjusting monetary policy tools such as interest rates and money supply. Generally speaking, the inflation rate should be kept at a low and stable level, such as 2%-3%.
2. Promote economic growth: A prudent monetary policy focuses on economic growth while maintaining price stability. Monetary policy can affect the investment and consumption demand of enterprises by adjusting interest rate and credit policy, thus promoting economic growth.
3. Stabilize the exchange rate: A prudent monetary policy helps to maintain the stability of the exchange rate and avoid the negative impact of excessive exchange rate fluctuations on imports, exports and economic growth. The central bank can stabilize the exchange rate by intervening in the foreign exchange market and adjusting interest rates.
4. Guard against financial risks: A prudent monetary policy requires the central bank to pay attention to the risks in the financial market and guard against financial risks by strengthening supervision and adjusting interest rates. This will help maintain financial stability and ensure healthy economic development.
5. Transparency and communication: A prudent monetary policy emphasizes transparency and communication with the public. The central bank should improve the transparency of monetary policy by issuing policy reports and holding press conferences, so that the public can understand the policy intentions and trends and enhance the policy effect.
In short, a prudent monetary policy emphasizes balance and sustainability. A prudent monetary policy is conducive to maintaining economic stability and improving public welfare by maintaining price stability, promoting economic growth, stabilizing exchange rate, preventing financial risks and strengthening transparency.