"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

2272 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Assess macroeconomic policies which might be used to respond to rising commodity prices during a period of slow economic growth


Explain the impacts of a fall in interest rates on the rate of GDP growth of a country.


To what extent do the main macroeconomic objectives conflict?


How do I prepare for a longer essay question?


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