👉 Monetary engineering refers to the process by which central banks or governments manipulate the money supply and interest rates to influence economic conditions, such as inflation, employment, and economic growth. This is typically achieved through tools like open market operations, adjusting reserve requirements for banks, and setting benchmark interest rates. By increasing the money supply or lowering interest rates, central banks can stimulate borrowing and spending, potentially boosting economic activity. Conversely, reducing the money supply or raising interest rates can help curb inflation by making borrowing more expensive and slowing down economic growth. However, excessive or poorly managed monetary engineering can lead to unintended consequences, such as asset bubbles, inflationary pressures, or financial instability.
