In this process, central banks through their monetary policy operations influence longer-term interest rates, overall economic activity and ultimately, prices. They aim to achieve price stability (low and stable inflation) over a period of time while minimising fluctuations in output and employment.
Over time, the functions and priorities of central banks have evolved in line with domestic and global economic and financial developments and the prevailing politicaleconomic discourse. Yet, fostering monetary and financial stability has always remained the most important policy anchor of a central bank in its pursuit of achieving maximum sustainable levels of output in the economy.