Discretionary fiscal policy consists of intentional adjustments to public finances, including changes to taxes, government purchases, or benefit payments, made by policymakers to achieve economic or social aims. Unlike built-in fiscal mechanisms that respond without fresh legislative action, these interventions require an explicit decision and can be used to stimulate a weak economy, moderate overheating, or address other policy priorities.
Source: European Central Bank (ECB) (source). This glossary entry is an independently worded adaptation of the cited information.