Maintaining the right balance of controlling inflation and growing the economy has always been an issue with the central banks. In the contemporary global economic context, various policies are open to central banks for maintaining this equilibrium. Below are some ways in which it can be done:

 Monetary Policy Adjustments

This is referred to as Monetary Policy. It is a tool used by the central banks to affect economic activity. Lowering the rates will spur borrowing and investment which will in turn catapult growth, on the other hand increasing it helps in curbing inflation through lowering spending.

 Targeted Lending Programs

Central banks can open up special lending windows to provide support for sectors that would be important for the recovery of the economy, such as small and medium enterprises or green energy projects.

By extending credit, which in turn makes sure banks have the liquidity to lend to businesses and the general public will boost economic activities.

 Macroprudential Policies

These functions can be performed by the monetary policies or interventions in the market such as banks and other financial institutions. Those are the ones that give loans and advances and accept deposits, they have to carry out their duties with due care.

Exchange Rate Management

Foreign Exchange Market Interference: Application of the policy of manipulating the exchange rate can have a direct effect on inflationary and growth dimensions by influencing export competitiveness as well as import prices.

Quantitative Easing

This involves buying government securities or other financial assets to increase the money supply which in turn will motivate lending and investment, thus supporting growth.