What is Setting monetary policy?

Answer 1

Monetary policy rests on the relationship between the rates of interest in an economy, that is, the price at which money can be borrowed from, and the total availability of money. Monetary policy make use of a variety of tools to control one or both of these, to influence outcomes like economic growth, inflation, exchange rates with other currencies and unemployment. Where currency is under a monopoly of issuance, or where there is a regulated system of issuing currency through banks which are tied to a central bank, the monetary authorities has the ability to change the money supply and thus influence the interest rates for the sake policy goals.