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.

Notes:

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

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

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Monetary policy

Actions taken by the Board of Governors of the Federal Reserve System to influence the money supply or interest rates.

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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.