What are the main tools employed by the Central Bank in performing its functions?
Among the functions of the Central Bank of The Bahamas, the regulation of the supply of money and credit is especially important to the Bank’s overall objective of monetary stability. Accordingly, there are five primary instruments through which the Bank seeks to influence the flow and supply of money and credit in the banking system: Reserve Requirements, Discount Policy, Selective Credit Controls, Moral Suasion and Open Market Operations. In The Bahamas, while Open Market Operations have been employed within a very limited context, and Reserve Requirements have remained virtually unchanged, Discount Policy–supplemented by Moral Suasion–have been used with far greater regularity, and have been most effective in the Bank’s efforts to manage bank liquidity.
