Monetary Policy
Central bank actions that manage money supply and interest rates to steer the economy.
Quick answer
Monetary policy is how a central bank manages money supply and interest rates.
Definition
Monetary policy is how a central bank manages the money supply and interest rates to guide inflation and growth. It is the main driver of currency value because rates determine the yield a currency offers. Policy decisions are scheduled, so traders prepare for them in advance.
How It Works
- It is the main driver of currency value
- Rate decisions are scheduled events
- Hawkish and dovish shifts move markets
Trading Tips
1
Know the policy stance of the currencies you trade
2
Watch the statement, not just the decision
3
Prepare positions around the schedule
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