Friday, July 19, 2024

Monetary Tightening

In this article, We learn about “Monetary Tightening “.Let’s Go!

Monetary Tightening is a policy in which the central bank increases interest rates and deposit ratios to make it less difficult to obtain credit.

This typically occurs when central banks seek to slow overheating economic growth.

Monetary tightening is considered a contractionary monetary policy.

When the economy accelerates too fast or inflation rises too fast, the central bank will adopt tightening monetary policy.

The central bank tightens monetary policy or tightens money by raising short-term interest rates.

Raising interest rates will increase the cost of borrowing and effectively make it less attractive.

Tight monetary policy can also be implemented through open market operations to sell the central bank’s on-balance sheet assets to the market.

A monetary tightening can have a negative impact on security prices and make it difficult to obtain a loan for a home or business.

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