As monetary policy proves to be the most important and effective tool in managing inflation, the central bank should enhance the effectiveness of monetary policy to ensure price stability and, by doing so, promote economic growth. II.
Monetary policy effectiveness has faced challenges in recent years  The independence and effectiveness of China’s monetary policy has met with serious challenges from rapid expansion of RMB supply as a result of foreign exchange purchase. Prior to 1993, China ran current account surplus and capital and financial account surplus on an alternate basis.