All of the above
The central bank is an essential institution in the economy, responsible for maintaining stable economic conditions to promote economic growth. The central bank uses various monetary policy tools to achieve this goal, including interest rates, open market operations, and federal funds rates. These tools are under the control of the central bank, which ensures they are used in the best interests of the economy, rather than benefiting individuals or political parties.
To maintain the central bank's independence, most central banks are structured to be independent of political influence. This means that the central bank can make decisions based on long-term economic goals, rather than short-term political considerations. An independent central bank is generally considered more credible by the public, which can help to reduce inflationary expectations and promote economic stability.
In summary, the central bank plays a critical role in the economy by ensuring stable economic conditions that promote growth. Its ability to use monetary policy tools, such as interest rates and open market operations, helps to maintain these conditions. Central bank independence is crucial to ensure that decisions are made for the good of the economy rather than for the benefit of individuals or political parties.