What is the role of central banks in the economy?

What is the role of central banks in the economy?

Central banks manage a country's currency, money supply, and interest rates to ensure economic stability.

How do central banks influence inflation?

They adjust interest rates and control money supply to either stimulate or cool down the economy, affecting inflation.

What tools do central banks use to implement monetary policy?

Central banks use tools like open market operations, discount rates, and reserve requirements to influence the economy.

Can you explain the concept of quantitative easing?

Quantitative easing is a monetary policy where central banks purchase securities to increase money supply and lower interest rates.

What are the risks associated with central bank policies?

Risks include inflation, asset bubbles, and potential loss of credibility if policies are perceived as ineffective.