What is monitory policy?

Monetary policy is a set of tools used by a nation's central bank (in Pakistan State
Bank of Pakistan) to control the overall money supply and promote economic
growth and employ strategies such as revising interest rates and changing bank
reserve requirements as well as financial markets stability & overall price stability.
Below are the some highlighted points of current Monitory policy of Pakistan:
1. The objective of SBP’s monetary policy is to achieve price stability by controlling
inflation.
2. At the same time, SBP also aims to ensure financial stability, particularly the
smooth functioning of the financial market.
3. SBP also ensure the smooth payment system.
4. The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has
kept the key policy rate unchanged at 21%.
5. In May 2015, SBP announced changes in the existing Monetary Policy Framework
by introducing the SBP Policy (target) Rate.
6. Before the existence of the corridor, the overnight money market repo rate
remained very volatile, which often diluted the monetary policy signals.
7. Operational target of SBP’s existing monetary policy framework is to maintain
the interbank overnight repo rate close to the SBP Policy (target) Rate.
8. SBP currently does not set an intermediate target for any nominal variable; such
as M2 growth, exchange rate, etc.
9. In practice, inflation (and inflation forecast) implicitly serves as nominal anchor
in the current monetary policy approach in Pakistan.
10. SBP adopted a contractionary policy often results in the tightening of credit
through increased interest rates, increased unemployment, reduced business
investment, and reduced consumer spending. There is commonly an overall
reduction in the gross domestic product (GDP).