Monetary policy and poverty reduction

There is now a consensus that economic growth is a dominant determinant of poverty. That is, poverty reduction requires sustained economic growth significantly above the population growth so that per capita income continues to rise. Economic growth raises mean income and reduces the proportion of the population living below any absolute poverty line. It is generally believed that growth that is distribution neutral has a greater impact on poverty reduction than growth that generates inequality. This follows from the understanding that any increase in the national 'pie' (Gross Domestic Product or GDP) is likely to benefit the poor if their share in GDP is larger. On the other hand, if income distribution becomes more skewed towards the rich with economic growth, "incomes of as many or more people may be below the poverty line even though the poverty line falls to a lower point in the distribution". Simarly, non-inflationary economic growth is likely to benefit the poor more than the economic growth that accompanies inflation, simply because inflation reduces purchasing power.