Tight monetary policy is a course of action undertaken by a central bank such as the Federal Reserve to slow down overheated economic growth, constrict spending in an economy that is seen to be accelerating too quickly, or to curb inflation when it is rising too fast.
The central bank tightens policy or makes money tight by raising short-term interest rates through policy changes to the discount rate and federal funds rate.
Boosting interest rates increases the cost of borrowing and effectively reduces its attractiveness. Tight monetary policy can also be implemented via selling assets on the central bank's balance sheet to the market through open market operations.
Central banks around the world use monetary policy to regulate specific factors within the economy. Central banks most often use the federal funds rate as a leading tool for regulating market factors.