Monetary policy refers to the collection of actions that a central bank undertakes in order to control the quantity of money in a particular economy and the channels by which the money is supplied. In order to do so, central banks perform a variety of actions, including modifying the interest rate, buying or selling government bonds, regulating foreign exchange rates, and changing the amount of money banks are required to maintain as reserves. The reason why central banks use monetary policy is to achieve certain economic objectives, such as controlling inflation, consumption, growth, and liquidity.
