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Full Version: What is monetary policy, What are the aims and tools of monetary policy?
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If there is no fluctuation or disorder in the economy, there are some policies that citizens have not even heard of, but that the central bank has implemented due to a small touch on the economy of countries. A board meets any day within certain months to make some changes. In accordance with the decisions taken by this board, it is aimed to ensure the stability of FIAs in the most accurate way. In order to achieve the situation they are aiming for with the help of some tools, central banks explain the changes made in precise and clear language by having the relevant board meet. Before and after this announcement, it is examined in detail what kind of movements the market is in. Decisions made on the board directly affect many investors. It is very important to learn the monetary policies that the central bank applies to know what its decisions are aimed at.

What Is Monetary Policy?

Decisions made by the Central Bank, which can actively intervene in the economy within the country, aimed at ensuring that the price of money circulating in the economy is revealed are called monetary policy. The Central Bank defines this term as follows: “it refers to decisions taken to affect the affordability and cost of money in order to achieve goals such as economic growth, employment growth and price stability."This definition made by the central bank is not very descriptive. This is because monetary policies, which are within the limits of central banks ' responsibility, have a wide range of influence, from growth to inflation. After price stability is achieved, situations such as high inflation and deflation are prevented.

Who Determines Monetary Policies?

The Central Bank of the Republic of Turkey is the only organization authorized to determine and implement monetary policies in Turkey. This institution uses its monetary policies in order to fully achieve price stability. The central bank, which directs prices through monetary policies, generally actively uses short-term interest rates to maintain this functioning. Short-term interest rates are equivalent to the rate that the central bank uses in transactions with financial public institutions and organizations. If the central bank makes any changes to these rates, financial institutions reflect this change directly to their customers.

What Are The Goals Of Monetary Policy?

Monetary policies implemented in order to achieve economic goals in the country's economy ensure that the money supply to the market is carried out under the management of the central bank. The main goal of this application is to ensure price stability. Along with price stability, inflation is controlled.

If We List The Main Goals Of Monetary Policy;

1. Controlling inflation by ensuring price stability,

2. Control changes in exchange rates to keep the balance of external payments stable,


Eliminating unemployment and increasing employment within the country to high levels,

4. Enabling investors to invest in healthier environments by ensuring interest rate stability,

5. To strive to achieve the economic growth target set by the country.

What Are Monetary Policy Tools?

The central bank's most important goal is to help achieve economic growth, full employment and balance of payments goals by ensuring price stability. The central bank implements monetary policy tools to meet these goals. With the help of these tools, the money supply is affected. Let's get to know monetary policy tools closely.

CBRT interest rates

Interest rates that are effective in the exchange of debt between banks and the CBRT are regulated. In this way, the liquidity in circulation in the market is affected.

Open Market Transactions

The clearest explanation for this term is that the Central Bank buys and sells government bonds. Thanks to this tool, very fast intervention is carried out on the money circulating in the market.

Rediscount Rates

It is the rebate of real and legal persons to the Central Bank of bills whose maturity is approaching that discounted by the banks.

Currency Transactions

Foreign exchange transactions that are applied to affect the value of the country's currency against other currencies.

Mandatory Provisions
The central bank sets mandatory deposit rates and can control the money supply in the market. For example, by increasing the mandatory provision rate, the money supply can be reduced.