Monetary Easing
Central bank policy that adds money and lowers rates to stimulate the economy.
Quick answer
Monetary easing is central bank action to lower rates and expand money supply to stimulate growth.
Definition
Monetary easing is when a central bank cuts interest rates or expands the money supply to support growth. It tends to weaken the currency in the near term because lower rates reduce its yield appeal. Traders watch easing cycles closely because they set the direction of many pairs.
How It Works
- It usually weakens the currency
- Lower rates cut yield appeal
- It often supports equities and risk assets
Trading Tips
1
Track easing cycles for currency direction
2
Read it against the policy of the other side of the pair
3
Expect the market to price easing before it happens
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