Money & budgets
monetary policy
Central bank action on interest rates and the money supply to influence inflation and employment. Distinct from fiscal policy, which is taxing and spending.
In full
The Federal Reserve conducts monetary policy; Congress and the President conduct fiscal policy. Raising rates cools demand and inflation at the cost of employment and growth; lowering them does the reverse. Because monetary policy operates with a lag and fiscal policy requires legislation, the two frequently pull in different directions.
Also written as: fiscal policy
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A plain-language explanation for civic education, not legal advice. When in doubt, the official source named above controls.