monetary policy



  • noun the government’s policy relating to finance, e.g. bank interest rates, taxes, government expenditure, and borrowing


  • noun the government’s policy relating to the money supply, bank interest rates and borrowing. If a government wants to stimulate the economy it will adopt reflationary measures such as increasing spending and reducing taxation; if it wants to cool down the economy in a boom, it will adopt deflationary measures and reduce government spending and increase taxation.


  • How a nation's central bank regulates interest rates and the money supply within the country. Central banks like the U.S. Federal Reserve Bank usually set monetary policy by altering benchmark interest rates. This can significantly affect the forex market since higher rates are good for a currency, but lower rates usually cause a currency to fall.