In every country of the world, central banks’ role is to protect national currency and look after national economy. Every state has separate central bank that operates at state level. Central banks are responsible for government accounts and monitoring commercial banks. The right to change the base rates within the country is most influential weapon of a central bank. This is the reason why key market players remain alert and watch every move and statement of the central bank very minutely.

The main tool of central banks is regulation of interest rate, which is rarely utilised efficiently. Central banks have the right to intervene directly in Forex markets that may have positive as well as harmful effects. Moreover, central banks are major government body that holds the power to turn market directions and protect national currency. So central banks are considered to be an institution where state manages its market and currency rates.

AHMAD AWAD,

Lahore, May 22.