Monetary policy
Article
Monetary policy is the process by which a central bank or monetary authority manages interest rates, money, credit, and financial conditions to influence inflation, employment, output, exchange rates, and economic stability.
The most common instrument is a policy interest rate that affects borrowing costs throughout the financial system. Central banks may also use reserve requirements, open-market operations, lending facilities, asset purchases, foreign-exchange intervention, and communication about future policy.
Expansionary monetary policy lowers interest rates or increases liquidity to encourage borrowing, spending, investment, and employment. Contractionary policy raises rates or reduces liquidity to restrain demand and control inflation.
Policy works with delays and its effects depend on banking conditions, expectations, debt levels, exchange rates, asset prices, and the state of the economy. Many central banks operate with an inflation target while also considering employment, financial stability, and economic growth.
Source details and credits
- Source / publisher: Wikipedia
- URL type: WWW
- Credits: Wikipedia
- URL: https://en.wikipedia.org/wiki/Monetary_policy