What is the impact of central banks on inflation?

What is the impact of central banks on inflation?

Central banks play a crucial role in controlling inflation through monetary policy, primarily by adjusting interest rates.

How do interest rates affect inflation?

When central banks raise interest rates, borrowing becomes more expensive, which can reduce spending and lower inflation.

Can you explain quantitative easing and its effect on inflation?

Quantitative easing involves central banks purchasing assets to inject money into the economy, which can lead to higher inflation if too much money is created.

What are the risks of central banks trying to control inflation?

The risks include stifling economic growth, creating asset bubbles, and potentially leading to hyperinflation if not managed carefully.