What is the role of the central bank in controlling interest rates?

The central bank controls interest rates as part of its monetary policy to influence economic conditions. By raising interest rates, the central bank can cool down an overheating economy by making borrowing more expensive, which helps reduce consumer spending and business investment. Conversely, by lowering interest rates, the central bank can stimulate economic activity during a slowdown by making borrowing cheaper, which encourages spending and investment. Central banks adjust interest rates to manage inflation, control unemployment, and stabilize the currency, aiming for a balanced and healthy economy.