Harrowing tale of devaluations | GulfNews.com:
"A few might mistake the role of a central bank to purely oversee what investment and commercial banks are doing. Not so, and it never is limited to setting overnight rates or reserve ratios to partially ensure bank deposits against bank runs.
These and a few other processes work in harmony towards controlling the money supply or keeping inflation under control, which are two sides to a coin. The money supply works towards serving another role for the central bank, which is keeping inflation at an acceptable level. If achieved, this serves one of its other roles, which is guarding the national currency’s value.
It’s the central bank that uses different monetary instruments to fulfil the role and set a basis for economic prosperity through carefully studied strategies. These roles, however, cannot succeed on their own even though they do serve one another. And one that is essential in serving all of the above is the central bank’s role in acquiring and managing an appropriate portfolio of reserves that include foreign currencies, gold, bonds, commercial notes, and others."
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