This paper provides a comprehensive overview of monetary policy throughout history, its fundamental instruments, and the contemporary challenges and adjustments faced by central banks. The paper analyzes how monetary policy has evolved in response to various economic conditions, from the gold standard to today’s instruments such as quantitative easing and inflation targeting. The introduction sets the foundation by addressing the primary role of monetary policy in managing economic cycles, emphasizing its importance in stabilizing economies. The historical review of monetary policy includes an analysis of how different systems, such as the gold standard, the Bretton Woods system, influenced the formation of modern monetary policies. The role of key theoretical approaches is explored to demonstrate how these theories have shaped central bank strategies. The paper thoroughly examines key instruments of monetary policy, including interest rates, open market operations, bank reserves, and quantitative easing. Special emphasis is placed on how these instruments were used during global financial crises, particularly following the 2008 crisis and the COVID-19 pandemic. Quantitative easing, as an unconventional tool, is analyzed in detail, including its role in stabilizing financial markets and stimulating growth in a low-interest-rate environment. Additionally, the paper explores the impact of contemporary global challenges on monetary policy, such as the pandemic, geopolitical instability (like the war in Ukraine), energy shocks, and climate change. In the context of COVID-19, the study examines how central banks quickly adapted their policies to prevent a deep economic recession through interest rate cuts and providing additional liquidity. Special attention is given to the impact of Central Bank Digital Currencies (CBDCs), which represent a potentially revolutionary change in how central banks conduct monetary policy and ensure financial stability. A comparative analysis of the monetary policies of various countries, including the European Central Bank (ECB) and the Federal Reserve (Fed), offers insights into the different approaches and outcomes achieved by central banks in dealing with crises. For example, the paper examines how the ECB used inflation targeting and quantitative easing to maintain stability in the eurozone, while the Fed and the Bank of Japan applied different combinations of tools to manage the aftermath of the global crisis. The concluding section reflects on future challenges for monetary policy, with an emphasis on digital currencies, fintech innovations, and geopolitical changes. It concludes that central banks will need to balance innovation with the need to preserve the stability of the financial system. The potential benefits of introducing Central Bank Digital Currencies, along with the risks they pose, are highlighted as key topics for the future of monetary policy. This paper contributes to a better understanding of the evolution of monetary policy, its instruments, and contemporary challenges, as well as the necessary adjustments for the future.