Central banks are very important for helping the economy grow. They do this through something called monetary policy. Let’s break this down into easy steps:

1. Interest Rates: Central banks can change interest rates. When they lower these rates, it becomes cheaper to borrow money. This encourages people and businesses to spend and invest more. For example, if the interest rate drops from 3% to 1%, loans for businesses become much cheaper.

2. Money Supply: Central banks also control how much money is available in the economy. They use tools like open market operations to do this. When they add more money, it can help the economy grow. But if they take money away, it can help control rising prices, which is called inflation.

3. Inflation Targeting: Central banks set a target for how much prices should rise over time. This helps create a stable environment. When people feel confident about the economy, they are more likely to spend and invest their money.

In summary, central banks help guide the economy like a steering wheel, leading it toward stability and growth.