Monetary Policy
Central bank actions to manage money supply, interest rates, and economic stability.
Full Definition
Monetary policy encompasses the tools and strategies central banks use to control inflation, stabilize currency values, and promote economic growth. Hawkish policy (raising rates, reducing money supply) tends to strengthen a currency, while dovish policy (lowering rates, increasing supply) tends to weaken it. Policy statements, meeting minutes, and forward guidance are closely watched by forex traders.