monetary policy

The plan undertaken by a central bank, such as the Federal Reserve Bank in the U.S., to influence the cost and availability of money and credit. Monetary policies are put into effect in order to help promote national economic goals. For example, a monetary policy may be followed to raise or lower short-term interest rates. Printing more money and putting it into circulation is a monetary policy that is followed when a country faces deflation, or falling inflation, because this strategy tends to increase inflation.