Monetary Policy Tracker

Understanding Monetary Policy

Monetary policy refers to the actions central banks take to manage money supply and interest rates in an economy. When a central bank raises rates (a "hike"), borrowing becomes more expensive, which tends to slow economic activity and reduce inflation. When it cuts rates, borrowing becomes cheaper, stimulating spending and investment. A hold decision signals the bank believes current conditions are appropriate.

Forward guidance communicates expected future policy actions, helping markets anticipate rate paths. Divergence between central banks (e.g., one hiking while another cuts) affects currency markets and capital flows.Learn more in our guide →