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?
Show answer
Answer: A. Statement-I is correct: after the pandemic, central banks like the US Fed, ECB and RBI raised interest rates in 2022-23 to fight inflation. Statement-II is correct and explains it: they raise rates because they believe monetary policy (making money costlier) can bring down rising prices. So A.
Watch for: Do not pick B just because Statement-II is a general statement; it directly explains the hikes.
Why the other options are wrong
- B. Wrong because Statement-II is exactly the reason for the rate hikes in Statement-I.
- C. Wrong because Statement-II is true; this is the basic logic of inflation targeting.
- D. Wrong because Statement-I is true; rate hikes happened widely in 2022-23.
Source to check: RBI Monetary Policy Statements 2022-23 (rbi.org.in); IMF World Economic Outlook, October 2022
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.