Central bank policy is the set of policies that a central bank uses to pursue its monetary goals. A central bank may employ a variety of tools to achieve its objectives, including adjusting interest rates, manipulating the amount of money in the financial system by buying or selling assets, and imposing requirements for the quality of securities that banks must hold as collateral. The goal of the central bank is to ensure that these tools are working effectively in support of the overall economic and financial stability of the country or region.

A key goal of many central banks is to maintain low and stable inflation (see Explain Inflation). This objective helps preserve the value, or purchasing power, of money over time. In a world of largely globalized markets, this is also an important way to protect the local economy from disruptions in international trade.

Safeguarding financial stability is another traditional goal of most central banks, which are often designated as lenders of last resort. Although this was a less important concern before the Global Financial Crisis, it has received renewed attention since then, as evidenced by central bank actions to help prevent systemic crises.

Providing sufficient liquidity in the financial system is a third major central bank goal, which is often accomplished by providing short-term funding to support the economy when needed. This can be done by increasing the amount of reserves that a central bank holds, or by purchasing large amounts of financial instruments from the market in a programme known as quantitative easing. Normally, these purchases of assets are designed to reduce the price of lending or investing by making financial instruments more plentiful and less expensive.