The Bank will accordingly continue to influence the total monetary demand in the economy to achieve price stability. The Reserve Bank controls the supply of money through its operations in providing liquidity to the banking sector and by affecting the total demand for money that emanates from the private and public sector.
Its operational variable in this process is the level of short-term interest rates. The level of interest rates is determined primarily by total saving in the economy, the inflow of capital, and by the demand for funds from government, businesses and private individuals. The central bank affects the cost of short-term funds through the impact of its actions on the repo rate, i.e.