- Statement-I correctly describes the global trend of central banks raising interest rates post-pandemic. - Statement-II correctly describes the core belief of central banks that monetary policy can be used to combat inflation. - Statement-II explains the rationale behind the action described in Statement-I (raising rates to fight rising prices).
Consider the following statements : Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes. Statement-II: Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means. Which one of the following is correct in respect of the above statements?
Asked in UPSC IAS 2023 · Topic: Money & Banking (Monetary Policy: Objectives, Instruments (quantitative and qualitative), and Transmission Mechanism)
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Answer: A. Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-1
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