How does monetary policy impact government borrowing costs?

How does monetary policy impact government borrowing costs?

Monetary policy can impact government borrowing costs through the manipulation of interest rates. When the central bank implements expansionary monetary policy, it typically lowers interest rates to stimulate economic growth. This can result in lower borrowing costs for the government, as they can issue bonds and borrow money at lower interest rates. Conversely, when the central bank implements contractionary monetary policy, it raises interest rates to control inflation. This can lead to higher borrowing costs for the government, as they would need to pay higher interest rates on their debt.