Forex Dictionary Terms

Monetary Easing

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Definition – What does Monetary Easing mean?

Monetary easing is a type of currency intervention where a nations central bank either keeps interest rates artificially low or expands the money supply by making open market purchases of its own sovereign debt.

ForexTerms explains Monetary Easing

Monetary easing is meant to spur a nations economy into growth mode by making capital readily available. However, monetary easing can also become a catalyst for inflation. When a nation floods its system with easy credit (via low interest rates) or floods the market with currency, it is hoping that the economy will expand. If the economy expands and monetary policy tightened up again, then the temporary inflation risk was worthwhile from an economy standpoint. If, however, the monetary easing fails, the inflation that follows may leave the nation worse off than if no action had been taken at all.

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