Monetary authority

In finance and economics, a monetary authority is the entity which controls the money supply of a given currency, often with the objective of controlling inflation or interest rates. With its monetary tools, a monetary authority is able to effectively influence the development of the short-term interest rates for that currency, but can also influence other parameters which control the cost and availability of money.

Classically, there is one monetary authority for one country with its currency. There are also other set-ups, e.g. when a group of countries have a joint currency like for the euro in the eurozone countries. In this case one monetary authority controls the money supply of one currency for a group of countries.

Generally, a monetary authority is a central bank with a certain degree of independence from the government(s) and its political targets and decisions. But depending on the political set-up, governments can have as much as a de facto control over monetary policy if they are allowed to influence or control their central bank.