Operating Procedure and Instruments
The operating framework of monetary policy refers to how the various aspects of monetary policy are implemented. These aspects are briefly explained as below:
Choosing the operating target –The operating target to the variable (for e.g. inflation) that monetary policy can influence with its actions.
Choosing the intermediate target - (e.g. economic stability) is a variable which central bank can hope to influence to a reasonable degree.
Choosing the policy instruments -The credit policy instruments are the various tools that a central bank can use to influence money market and credit conditions and pursue its monetary policy objectives.
The day to day implementation of monetary policy by central banks through various instruments is referred to as ‘operating procedures’.
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