Economy
Monetary Policy
Definition
Actions by a central bank to manage the money supply and interest rates to influence economic activity.
Explanation
Monetary policy has two main tools: interest rates and quantitative easing/tightening. Raising rates slows inflation but can reduce growth; cutting rates stimulates growth but risks inflation. The US Federal Reserve, European Central Bank, and Bank of Japan are the most influential central banks. "Hawkish" policy means tightening; "dovish" means easing.