Monetary policy refers to the actions taken by a country's central bank, such as the Federal Reserve in the United States, to manage the money supply and interest rates. The main goals of monetary policy are to control inflation, stabilize the currency, and promote economic growth. By adjusting interest rates, the central bank can influence borrowing and spending in the economy. There are two main types of monetary policy: expansionary and contractionary. Expansionary policy aims to increase the money supply and lower interest rates to stimulate economic activity, while contractionary policy seeks to reduce the money supply and raise interest rates to curb inflation.