Macro the Mightiest: ET Prime Special - Part 5: Monetary Policy is half art, half science

All eyes were on the RBI’s Monetary Policy Committee (MPC) and its pronouncements this week. This is not surprising. Monetary policy is the most powerful tool available to governments to manage economic conditions. Through carefully-calibrated decisions on interest rates, money supply, and financial system liquidity, the RBI, or any central bank, can influence employment levels, inflation rates, economic growth, financial stability – as well as the stock markets. So, like other macroeconomic variables, understanding monetary policy is important. In this series we discuss one macroeconomic factor every fortnight. Even a basic understanding will tell you when to react and when not to react to macroeconomic headlines.