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Monetary Policy > Understanding Monetary Policy > Transmission mechanism > Credit channel
Service Manager   Akkharaphol (66(0)2283-6277)    Pornpen (66(0)2283-5616)   
  Credit channel 

When the central bank decides to decrease the policy rate, adjustments in short-term money market rates occur.  Debt obligations of businesses decline, thus strengthening their balance sheets.  In turn, financial institutions are more willing to lend to businesses given lower risks.  As a result, investment increases, resulting in higher economic growth.  At the same time, inflationary pressures rise.

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