Monetary Policy

The actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault (bank reserves). 



|||In the United States, the Federal Reserve is in charge of monetary policy.  The monetary policy is one of the ways the government attempts to control the economy. If the money supply grows too fast inflation will be too high if it is too slow economic growth slows which affects the gross domestic product GDP. In general the US attempts to maintain a steady inflation of between 2% to 3%.