"Why do the central bank control monetary policy, but the government control fiscal policy?"

As of 1997, monetary policy has been independent from the government in order to remove any political bias or influence from the decision making. The government often had the habit of reducing interest rates prior to elections in order to boost spending and consumer confidence, thereby winning votes, and then raising interest rates once elected. This is unsustainable and can lead to excess inflation and instability, and hence the setting of interest rates was made independent.
Furthermore, this essentially reduces the scope and extent of government intervention in the economy, allowing the government to use its time and resources more effectively on fiscal policy.

TD
Answered by Tutor114968 D. Economics tutor

2328 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Analyse positive impacts of a merger between two firms.


Should the fizzy drinks market be regulated or left to the free workings of the market?


Explain why the housing market is not a perfectly competitive market.


If John’s elasticity of demand for burgers is constantly 0.9, and he buys 4 burgers when the price is £1.50 per burger, how many will he buy when the price is £1.00 per burger


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2026 by IXL Learning