What is a tight monetary policy?

A close monetary policy is a strategy that is usually evoked if there is a concern for growth in the economy. In general, this policy is triggered by a financial agency within a particular nation when the economy seems to grow at a rate that is considered too fast. The idea of ​​tight money policy is to slow the degree of inflation, which often comes with too fast rapid growth.

In the United States, the federal reserve system is usually an entity that provokes a close monetary policy. This is achieved by increasing short -term interest rates available to consumers. In the past, this event has shown the ability to help reduce inflation because it tends to prevent lending somewhat and thus slows the economy of a small margin.

At the same time, the federal reserve system can decide to sell state cash registers as a means of helping to slow down the pace of the economy. This aspect of the central bank policy works mainly by taking extra capital from open markets. JThe economy slows down to the pace, which is considered desirable, the reserve may be followed by the sales price of the treasuries along with valid interest.

Use access to close money to an economy that seems to grow too fast is one way to prevent the economy from getting into a refugee inflation period. Growth slowing means slowing inflation. Involving close monetary policy means minimizing the chances that inflation will grow to the extent that one or more consumer subsets suddenly found unable to keep up with a pace and begin to experience financial problems.

In principle, the main goal is to maintain the economy in a relatively stable state, which is in the best financial interest of the largest number of consumers within The Nation. Although there are usually other factors and strategies that are used in conjunction with close monetary policy, thisThe approach is often one of the first methods to evoke when it is assumed that the economy is growing too fast.