Okuzeka
Economics vocabulary · Central Banks and Interest Rates

Monetary policy

Meaning in economics, with examples

nounCore term

In economics, monetary policy means: The actions a central bank takes to influence interest rates, the money supply and credit in order to control inflation and support the economy.

In Turkish: para politikası

How it is used

Monetary policy is tight (restrictive, high rates) or loose (accommodative, low rates). Central banks tighten or ease it, and committees such as a Monetary Policy Committee meet regularly to decide. Contrast it with fiscal policy, which is run by the government.

Example sentences

  1. Monetary policy works with a lag, so a rate rise today may only affect inflation a year from now.

  2. The bank signalled that monetary policy would stay tight for some time.

Common collocations

  • tight monetary policy
  • loose monetary policy
  • tighten monetary policy
  • ease monetary policy
  • Monetary Policy Committee
  • central bankThe national institution that issues a country's currency, sets the main interest rate and works to keep prices and the financial system stable.
  • fiscal policyThe government's decisions about taxes and public spending, used to influence demand, growth, jobs and the state of the public finances.
  • interest rateThe price of borrowing money, shown as a yearly percentage of the amount borrowed; for savers, it is the return they earn on deposits.
  • quantitative easingA policy in which a central bank creates new money to buy large amounts of government bonds or other assets, aiming to lower long-term interest rates.
  • hawkishFavouring higher interest rates or tighter monetary policy because controlling inflation is seen as the top priority.

More terms: Central Banks and Interest Rates

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This page explains English vocabulary for learners. It is not financial advice.