Easing and tightening

Cutting rates to loosen money, or raising them to tighten

In detail

Easing means cutting rates or supplying money so households and companies can borrow more cheaply. It warms the economy and is usually read as a tailwind for share prices. Tightening is the reverse: rates go up, the flow of money is squeezed, and price rises are held back. Either way the effect takes months, sometimes more than a year, to show up.

Example

Cutting the policy rate from 0.5% to 0.25% is easing; raising it to 0.75% is tightening.

Related terms

Policy rate Central bank Inflation Fiscal policy

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For learning, not investment advice. Decisions are your own.