Policy Stance refers to the overall direction and intensity of monetary policy actions. Expansionary stance: Central bank aims to increase money supply and lower interest rates, stimulate demand and growth; appropriate during recession or weak growth; risks inflation if overused. Contractionary stance: Central bank aims to decrease money supply and raise interest rates, reduce demand and control inflation; appropriate during inflationary periods; risks recession if too aggressive. Neutral/Accommodative stance: Central bank neither expands nor contracts; maintains current conditions; appropriate during stable growth with moderate inflation. Hawkish stance: Inflation-fighting focus; prioritizes price stability; raises rates, contracts money supply; appropriate when inflation exceeds targets. Dovish stance: Growth-supporting focus; prioritizes employment and growth; lowers rates, expands money supply; appropriate when growth weak or unemployment high. Stance communication: Forward guidance signals future policy direction; helps shape market expectations; improves policy transmission. Bias terminology: "Tightening bias" (moving toward contractionary), "Easing bias" (moving toward expansionary). Calibration: Choosing appropriate intensity; aggressive vs. gradual; affects speed of economic adjustment. Time-consistency: Central bank credibility; if past promises don't match actions, expectations adjust, reducing effectiveness. Flexibility within stance: Can adjust magnitude within chosen stance; gradual changes allow markets to adapt. Real-world example: RBI switched from easing stance to tightening in 2022 due to inflation; communicated through FPC decisions. ICAI focus: Stance interpretation, policy signals, implications for rates and growth. Exam tip: Distinguish between stance (overall direction) and instruments (specific tools); stance guides instrument choices.