Monetary Policy
Central bank actions — rate changes, asset purchases, reserve requirements — designed to control inflation and support employment.
Monetary policy refers to the set of tools a central bank uses to manage the money supply and borrowing costs. The primary lever is the policy interest rate; secondary tools include quantitative easing/tightening, forward guidance, and reserve requirements.
Tight (hawkish) monetary policy restricts credit and cools inflation but risks recession. Loose (dovish) policy stimulates growth but risks overheating. The policy cycle — tightening → pausing → cutting → easing — is the single biggest driver of cross-asset returns over the medium term.