Monetary Policy – Definition, action and objectives

To achieve their goals, are the central banks of different economic policy measures. These are collectively referred to as monetary policy. The main instruments here are the key interest rate and the central bank. For investors, the monetary policy of the central banks is of great importance. With an expansive monetary policy of interest rate is lowered to spur lending and thus the economy. However, this also means low returns for fixed income investments. Conversely, a restrictive monetary policy to rising interest rates. At the same time, the money supply is characterized scarce to counter example of high inflation.

The main objectives of monetary policy:

keep inflation at a moderate level
keep prices stable
economic growth
low unemployment
Stable exchange rates
What are the objectives, the central bank’s monetary policy?

The central banks have with their monetary policy usually aims that not always are compatible with each other. The main objectives include:

Inflation target: Inflation is expected to remain at a moderate level. A slow rise in prices is quite desirable, since in this case the waiver shall be punished on investment. Rising prices on the other hand to quickly produce business less than they could. Through a constant inflation the change in the value of money is planned, which ensures stability.
Price stability: This is a special case of the inflation target. The average of the prices will change only slightly if possible. Determined this is based on a fixed basket.
Low unemployment: This object collides partially with price stability. A low unemployment tends to lead to more rising wages. This also means higher costs of production and thus to higher prices.

Continue Reading


Euro (bank code: EUR, currency sign: €, plural euros) is the currency of the Eurozone, including 17 countries of the European Union. It is the second most important reserve currency and the second most traded currency in the world after the U.S. dollar. At the end of 2009, more than 800 billion euros in circulation, it is the currency with higher total value of banknotes and coins in the world, overtaking the U.S. dollar. Estimates for the end of 2008, gross domestic product, taking into account the purchasing power parity of the euro is the second in this world after the United States.

Continue Reading


With the introduction of the euro has created a special logo (€). Following a public inquiry the original ten proposals were reduced to two, of which the Commission selects the final version – the letter “E” with twice the average horizontal line. Commission a reasoned choice as follows: “Inspiration for the € symbol itself comes from the Greek epsilon (her) – an indication of the cradle of European civilization – and the first letter in the word Europe, crossed by two parallel lines,” proving “the stability of the euro.” [ 15]

Continue Reading