Monetary Policy

Monetary Policy refers to the actions undertaken by a nation’s central bank to control money supply to achieve macroeconomic goals that promote sustainable economic growth. Generally classified as either expansionary or contractionary, Money Policy is utilized to achieve objectives including inflation, consumption, growth and liquidity. It has a great influence on the economic activity by manipulating the supplies of money and credit, and by altering these interests, by including tools such as open market operations, direct lending to banks, bank reserve requirements, unconventional emergency lending programs, and managing market expectations. The three objectives of monetary policy are controlling inflation, managing employment levels, and maintaining long term interest rates.