Monetary easing is a strategy used by central banks in which they lower interest rates and reserve requirements to make credit more accessible. It is a key component of expansionary monetary policy.
The primary goal of monetary easing is to boost economic activity during periods of slow growth or recession by encouraging borrowing, spending, and investment.
While monetary easing can yield significant positive effects on economic growth and stability, it also carries risks, particularly regarding inflation and financial market stability. This is why central banks switch between monetary easing and monetary tightening policies to promote growth while maintaining control over inflation.
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