Monetary Policy Formulation

Monetary policy formulation refers to how a country's central bank, like the Federal Reserve in the U.S., decides on actions to manage the economy’s money supply and interest rates. The goal is to promote economic stability, control inflation, and encourage employment. The central bank analyzes economic indicators, such as inflation rates and employment levels, to determine whether to raise or lower interest rates or change reserve requirements for banks. These decisions affect how much money is available for lending, influencing consumer spending and business investment, ultimately impacting overall economic growth.