Macroeconomics & Investing · Entry 14 of 71

What is Monetary Policy?

Central bank management of money supply and interest rates

Core Definition

Monetary Policy refers to actions by a central bank to manipulate the supply of money and credit in an economy. The goal is to promote sustainable economic growth.

Primary Objectives

1. Control Inflation & Maintain Price Stability: Central banks raise rates to cool down over-heating economies or lower rates to stimulate them.
2. Maximize Employment & Moderate Long-Term Interest Rates: Balanced interest rates encourage capital deployment and corporate hiring.