Monetary policy is the process by which the government, central bank, or monetary authority of a country controls (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy. Monetary theory provides insight into how to craft optimal monetary policy.
Monetary policy is referred to as either being an expansionary policy, or a concretionary policy, where an expansionary policy increases the total supply of money in the economy, and a concretionary policy decreases the total money supply. Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates, while concretionary policy involves raising interest rates in order to combat inflation. Monetary policy should be contrasted with fiscal policy, which refers to government borrowing, spending and taxation.
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China has banned banks in its ground-breaking free trade zones from certain lending activities to ease pressure on the yuan currency in offshore markets, two sources with direct knowledge of the matter said on Thursday.
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