Investor Glossary-accommodative monetary policyInvestor Glossary-accommodative monetary policyInvestor Glossary-accommodative monetary policyInvestor Glossary-accommodative monetary policyInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Accommodative Monetary Policy

The HTML to link to this page
 

An accommodative monetary policy is an effort by the U.S. Federal Reserve Board or another central bank to stimulate its nation's economy. Lower interest rates are the hallmark of an accommodative monetary policy. An interest rate is the cost of borrowing money; when money becomes cheaper through an accommodative monetary policy, it costs businesses and consumers less to borrow, thus they spend more. The additional spending of an accommodative monetary policy has a multiplier effect, and business picks up throughout the economy. At some point under an accommodative monetary policy, the economy tends to overheat. In other words, an accommodative monetary policy results in too much money chasing too few goods, or inflation. At that point, an accommodative monetary policy loses favor, as consumers and producers watch prices rise. The Fed then changes course from an accommodative monetary policy to "tighter money," i.e. it takes steps to raise interest rates, tamp down business activity, and reduce inflation. A reasonably accommodative monetary policy is liked by investors in equities, because more business activity usually produces greater earnings and higher stock prices.



Rate this accommodative monetary policy definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: quality assurance, minority interest, command economy, Zero Cost Collar, APR, annual return, Key Rate Duration, average price per share, ex-dividend date, phantom income, risk management, in escrow, EBITDA, diluted share, option premium, cancelled check, covered put, required rate of return, labor relations, VIX, balance sheet, current ratio, LIBOR, real GDP, 401a, debt service coverage, 1031 exchange, margin rate, 144a, liquidity ratio, class C shares, wholly-owned subsidiary, deferred tax, irrevocable trust, 1035 exchange, stock market close, deferred revenue, implied volatility, reverse mortgage, retained earnings, dividends payable, inflation, stock split, open position, limit order, ex-dividend, FICO score, FTSE, per diem


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use