Data Interpretation Fundamentals /
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Q73
2018,
Data Interpretation Fundamentals
The graph given below indicates the changes in key policy rates made by the Central Bank several times in a year: Which one of the following can be the most likely reason for the Central Bank for such an action?
Option D: Anti-inflationary stance Central Banks often adjust key policy rates to manage economic conditions. When a Central Bank raises interest rates, it typically aims to reduce inflation by making borrowing more expensive, thereby decreasing spending and investment. This action can help cool down an overheating economy and stabilize prices. Conversely, lowering rates can stimulate economic activity by making borrowing cheaper. However, if the graph indicates multiple rate hikes, it suggests a focus on controlling inflation. Thus, the most likely reason for the Central Bank's action, as indicated by the graph, is an _anti-inflationary stance_.