HDBF – Central Banking & Monetary Policy

Central Banking and Monetary Policy are central to the functioning of modern economies, as they influence money supply, interest rates, and overall financial stability. A central bank serves as the authority responsible for regulating the monetary system, ensuring price stability, and maintaining confidence in the financial sector. In Sri Lanka, the Central Bank of Sri Lanka (CBSL) plays a pivotal role in implementing monetary policies designed to manage inflation, stabilize the currency, and support sustainable economic growth. With challenges such as inflationary pressures, exchange rate fluctuations, and external debt concerns, the effectiveness of the CBSL’s monetary policy remains vital for macroeconomic stability.

On a global scale, leading central banks such as the Federal Reserve in the United States and the European Central Bank (ECB) use monetary policy tools to balance economic growth with inflation control, while also influencing global trade, investment flows, and exchange rates. Decisions made by these institutions often have spillover effects on emerging economies like Sri Lanka, shaping their access to international capital and foreign investment.

This subject provides students with a comprehensive understanding of the principles of central banking, the objectives of monetary policy, and the mechanisms through which policy decisions affect both domestic and international economic activity. By mastering these concepts, students will be equipped to critically analyze the role of monetary policy in promoting financial and economic stability.