Monetary policy

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    Monetary policy

    Monetary policy is the process by which the monetary authority of a country controls the supply of money. The main monetary authority usually is an independent central bank, but the government often has a significant influence on it.

    Monetary policy rests on the relationship between the interest rates in an economy and the total supply of money.

    The goals of monetary policy are, amongst others:

    Monetary policy matters to traders and investors because it can have a large scale effect on how markets trade.

    Monetary policy differs from fiscal policy, which refers to taxation and government spending/lending.