What is 'Monetary Policy'?

Monetary policy: Actions of a central bank or other agencies that determine the size and rate of growth of the money supply, which will affect interest rates. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

| Term of the Day Monetary Policy Monetary policy consists of the process of drafting, announcing, and implementing the plan of actions taken by the central bank, currency board, or other competent monetary authority of a country that controls the quantity of money in an economy and the channels by which new money is supplied. Monetary policy consists of management of money supply and interest rates, aimed at achieving macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity. These are achieved by actions such as modifying the interest rate, buying or selling government bonds, regulating foreign exchange rates, and changing the amount of money banks are required to maintain as reserves. Read More » Related to "Monetary Policy" Monetary Policy vs. Fiscal Policy: What's the Difference? Monetary policy involves decisions by central banks on issues such as interest rates. Fiscal policy typically is established legislatively and addresses issues such as tax rates and government spending. Read More » Fiscal Policy vs. Monetary Policy: Pros & Cons When it comes to influencing macroeconomic outcomes, governments have typically relied on one of two courses of action: monetary policy or fiscal policy. Read More » How the Federal Reserve Devises Monetary Policy Learn about the tools the Federal Reserve uses to influence interest rates and economic conditions. Find out the types of action a central bank may take. Read More » Related Definitions Central Bank A central bank is an entity responsible for the monetary system of a nation or a group of nations: regulating the money supply and interest rates. Read More » Inflation Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Read More » Gross Domestic Product (GDP) GDP is the monetary value of all finished goods and services made within a country during a specific period. Read More » Fiscal Policy The use of government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, inflation and economic growth. Read More » CONNECT WITH INVESTOPEDIA Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2019, Investopedia, LLC, All Rights Reserved | Privacy Policy