monetary policy

Monetary Policy

The actions of a central bank, currency board, or other regulatory committee, that determine the size and rate of growth of the money supply, which in turn affects interest rates.

Investopedia Commentary

In the United States, the Federal Reserve is in charge of monetary policy.

Related Links

The Federal Reserve (the Fed) Tutorial
What Are Central Banks?
Formulating Monetary Policy

See also: Discount Rate, Fed Funds Rate, Federal Reserve, Fiscal Policy, Interest Rates, Money Supply, Moral Suasion, Open Market Operations, Reflation

monetary policy

The Federal Reserve actions that are designed to influence the availability and cost of money. Specific policy includes changing the discount rate, altering bank reserve requirements, and open-market operations. In general, a policy to restrict monetary growth results in tightened credit conditions and, at least temporarily, higher rates of interest. This situation can be expected to have a negative impact on the security markets in the short run, although the long-run effects may be positive because of reduced inflationary pressures. Compare accommodative monetary policy.