India, Sept. 30 -- Monetary policy is one of the most important tools available to a central bank for managing an economy. In India, it is conducted by the Reserve Bank of India (RBI), and every two months, the RBI's Monetary Policy Committee (MPC) announces its decision on interest rates, liquidity, and other measures. These announcements make headlines because they affect everything from loan EMIs and deposit rates to inflation and GDP growth.

But what exactly is monetary policy, how does it work, and why does it matter to households, businesses, and investors?

Monetary policy refers to the process by which a country's central bank controls the supply of money, interest rates, and credit availability in the economy. Its ultimate aim i...