central bank

A central bank chair who is perceived as insufficiently independent from the executive branch can face reduced financial-market confidence that the central bank will raise interest rates as necessary to control inflation.

Lowering a central bank's policy interest rate reduces borrowing costs for consumer and business loans, which can make it cheaper for businesses to expand and hire and for consumers to purchase houses, automobiles, and other goods.

Reductions in a central bank's policy interest rate generally lead over time to lower borrowing costs for mortgages, auto loans, credit cards, and business loans, which tends to encourage consumer spending and business investment.

Lowering a central bank's main interest rate can increase inflationary pressure because cheaper borrowing costs tend to raise aggregate demand and push up prices.

Currency swap lines are financial arrangements in which one country's central bank or treasury provides another country with foreign-currency liquidity to support its currency or stabilize its exchange rate.

Uncertainty about future central bank interest-rate decisions is associated with increased short-term swings in stock prices and higher market volatility.

Central bank officials commonly resist cutting a benchmark interest rate when inflation is persistently above the central bank's stated inflation target because lowering rates can be inflationary.