Central banks help manage the economy when big problems happen around the world. They mainly do this by changing monetary policy, which refers to how they control money in the system.
Here are a few ways they respond:
Interest Rates: When the economy is struggling, they might lower interest rates. This makes it cheaper for people and businesses to borrow money, which can help boost spending.
Quantitative Easing: If things get really bad, central banks might buy things like bonds. This puts more money into the economy, making it easier for people to spend and invest.
Forward Guidance: They also share information about their future plans. This helps keep the markets calm and people feel more secure about their money.
For example, during the 2008 financial crisis, the Bank of England lowered interest rates. This helped the economy start to recover.
Central banks help manage the economy when big problems happen around the world. They mainly do this by changing monetary policy, which refers to how they control money in the system.
Here are a few ways they respond:
Interest Rates: When the economy is struggling, they might lower interest rates. This makes it cheaper for people and businesses to borrow money, which can help boost spending.
Quantitative Easing: If things get really bad, central banks might buy things like bonds. This puts more money into the economy, making it easier for people to spend and invest.
Forward Guidance: They also share information about their future plans. This helps keep the markets calm and people feel more secure about their money.
For example, during the 2008 financial crisis, the Bank of England lowered interest rates. This helped the economy start to recover.