The 'Interest Rate Policy' is a component of which one of the followin

The ‘Interest Rate Policy’ is a component of which one of the following policies ?

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Fiscal Policy

Monetary Policy

Trade Policy

Direct Control

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UPSC Combined Section Officer – 2024

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Interest Rate Policy is a key component of Monetary Policy. Monetary Policy refers to the actions undertaken by a central bank (like the Reserve Bank of India) to manipulate the money supply and credit conditions to stimulate or constrain economic activity.

Central banks use tools like policy interest rates (e.g., repo rate, reverse repo rate) to influence the overall cost of borrowing and lending in the economy.

Fiscal Policy is related to government spending and taxation. Trade Policy concerns international trade regulations. Direct Control is a broad term and not a specific policy category containing interest rates in this context. Monetary policy, through interest rate adjustments and other measures, impacts inflation, economic growth, and liquidity in the financial system.

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