Monetary Easing
Tue, Apr 15Monetary easing refers to the approach taken by a central bank to reduce interest rates and deposit ratios, thereby facilitating easier access to credit.
This approach simplifies borrowing for businesses, which in turn encourages investment and the expansion of their operations.
Monetary easing is a component of an expansionary monetary policy.
The immediate effect of monetary easing is typically an increase in stock prices.
In the medium term, it fosters economic growth. However, if this policy is maintained for an extended period, it can result in an excess of money pursuing a limited supply of goods and services, which may lead to inflation.
For this reason, most central banks alternate between monetary easing and monetary tightening policies to promote growth while managing inflation effectively.
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