Question

The risk of the stimulus monetary policy in the covid-19

Answer 1

A fog of uncertainity has been created by covid -19 pandemic.There is change in saving and spending habits of people as we are unaware of global trade The domestic supply and demand will also be affected .With the introduction of monetary policy there are many risks around that scenario.If the measues are lifted people will set back to normal activities but there is damage to demand and supply.We need to recover our economy from crisis and rebound the confidence in business.As this risk has created complication in growth and inflation.Due to this pandemic the bank has lowered policy rate to 0.25% and still reducing its rate will cause distortion in the financial instituitions behaviour.The monetary policy will provide stimulus and improve asset purchase programs.To achieve the target of inflation the monetary policy is required.When there is improvement in output then there is recovery in employment also.Private assets are bought by banks.Market conditions are improved slowly by lowering interest rates for businesses.To deliver stimulus Purchases are working through channels to achieve required target in inflation .