Monetary Policies and what it means for us ?

Monetary policies generally relate to price stability and price stability equates to low and stable inflation.

A quote from Alan Greenspan, a former Chairman of the US Federal Reserve - the central bank of the United States - is one of the most apt.

"For all practical purposes, price stability means that expected changes in the average price level are small enough and gradual enough that they do not materially enter business and household decisions."

So basically, the main objective of monetary policy would be to stabilise prices and is one of the primary concerns of central banks around the world.

The effects of monetary policy - interest rates - are ultimately seen in prices. A change in interest rates feeds through the economy, influencing demand, costs and then prices. Boosting demand, by lowering interest rates, may cause output to rise at a faster rate for a time. But monetary policy does not have a very lasting impact on output.

Overall, the unifying effect of an interest rate cut is the psychological effect it has on investors and consumers; they see it as a benefit to personal and corporate borrowing, which in turn leads to greater profits and an expanding economy.