Monetary Policy

Government policy that deals with the availability and cost of money. It is changed by making adjustments to the money supply and the level of short term official interest rates. Monetary policy has a direct effect on the overall level of economic activity and inflation. Governments often delegate the implementation of monetary policy to their country's central bank.

See also: Fiscal Policy, http://www.bankofengland.co.uk/monetarypolicy/how.htm