With monetary policy, a central bank increases or decreases the amount of currency and credit in circulation, in a continuing effort to keep inflation, growth and employment on track. In the U.S., the Federal Reserve is responsible for monetary policy.

What does monetary policy actually do?

Monetary policy is a set of actions that can be undertaken by a nation's central bank to control the overall money supply and achieve sustainable economic growth. Monetary policy can be broadly classified as either expansionary or contractionary.

What is the process of monetary policy?

Definition: Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.