Monetary policy refers to the process by which states control the available supply of money. This control might be achieved by setting aside cash reserves, investing in foreign currency markets, or adjusting interest rates.
Expanding the supply of money (typically achieved by lowering interest rates) helps to combat unemployment and recession. Contracting the supply of money (usually by raising interest rates) slows overheated economies, helping to prevent inflation.
In the United States, the {Federal Reserve} Board is charged with setting monetary policy.