How do central banks manage inflation?

How do central banks manage inflation?

Central banks manage inflation primarily through monetary policy, adjusting interest rates and controlling money supply.

What tools do they use to control the money supply?

They use tools like open market operations, reserve requirements, and the discount rate to influence the money supply.

Can you explain open market operations?

Open market operations involve buying or selling government securities to increase or decrease the amount of money in the banking system.

How does raising interest rates help with inflation?

Raising interest rates makes borrowing more expensive, which can reduce spending and investment, helping to lower inflation.