Monetary Policy
Monetary policy refers to the actions undertaken by a nation's central bank to manage the money supply and credit conditions to foster price stability and maximum employment. This is achieved primarily through tools like setting benchmark interest rates, conducting open market operations to influence liquidity, and establishing bank reserve requirements. By influencing the cost and availability of money, these actions directly impact borrowing costs for businesses and consumers, influence the behavior of financial markets, and steer the overall economic activity, making it a critical factor in financial planning and corporate strategy.
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2. The Goals of Monetary Policy