Monetary Policy

Monetary policy refers to the actions taken by a country’s central bank or monetary authority to manage the money supply and interest rates in the economy. Its primary goals are to achieve macroeconomic objectives such as controlling inflation, maintaining employment levels, and fostering economic growth.

By adjusting interest rates, buying or selling government securities, and changing reserve requirements for banks, monetary policy influences overall economic activity. There are two main types: expansionary monetary policy, which aims to increase money supply and stimulate the economy during periods of recession, and contractionary monetary policy, which seeks to decrease money supply to control inflation when the economy is overheating.

Effective monetary policy is crucial for ensuring economic stability and can significantly impact currency value, investment, consumption, and overall economic confidence.