A monetary policy that is typically implemented by a central bank or monetary authority in order to increase the amount of money available for lending by banks and other financial institutions. This has the effect of easing the money supply, and consequently, driving interest rates down, making it more attractive for individuals and businesses to borrow. In turn, this can expand the spending of households and the corporate sector, invigorating the economy, along the way.
Central banks initiate such a policy at times of high interest rates, sluggish economic activity, and deflationary pressures. However, once the economic wheel starts to speed up again, inflation becomes a serious concern for central banks, and the accommodative monetary policy may be reversed, by switching to a tight monetary policy.
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