Glossary of Terms

Monetary Policy 2019-06-20 08:00:00

Monetary Policy

Monetary policy is the method by which central banks and other financial regulators govern the supply of money and interest rates in an economy to promote stable prices and low unemployment.

Monetary policy can either be classified as expansionary or contractionary, depending on the regulator’s objectives. Central banks and regulators seek to use tools such as control of money supply and interest rates to influence output, employment and prices.

The United States economy has operated in an expansionary environment influenced by near-zero interest rates over the last decade as a result of the Federal Reserve’s objective of promoting private spending and investment and minimizing unemployment.