Central banks oversee the banking system in their country. They play an important role in managing a state’s currency, money supply, and interest rates. There are five major objectives of central banks.
Objectives of Central Banks
A central bank pursues a low and stable rate of inflation.
It aims for a high, stable real growth and high employment rate in the economy.
3. Stability in markets
4. Interest Rates
A central bank’s objective to maintain interest rates.
5. Exchange Rate
The bank also tries to maintain a stable exchange rates.
To Create a Successful Central Bank
A successful central bank needs to be independent from politics, policy makers and outside influence. It has to be transparent with its policies to maintain credibility. A central bank has to be accountable for its policies and decisions. A central bank has to be clear in communicating with financial markets & the public. This helps build trust with the public. The decision making process has to be made by a committee. There needs to be coordination of fiscal and monetary policy.