A central bank can influence whether its currency rises or falls in value this year. Compare the effects on different groups.
Let the currency appreciate
- Consumers: Imported goods and holidays abroad become cheaper.
- Exporters: Their goods become dearer abroad, so sales may fall.
- Inflation: Cheaper imports help keep inflation down.
An appreciation helps consumers and controls inflation, at a cost to exporters.
Let the currency depreciate
- Exporters: Their goods become cheaper abroad, so sales may rise.
- Consumers: Imports become dearer.
- Inflation: Dearer imports can push up prices.
A depreciation helps exporters and jobs, but raises import prices and inflation.
Keep the currency stable
- Firms: Can plan prices and contracts with more certainty.
- Central bank: Must buy or sell currency to hold the rate.
Stability helps planning, but it may need intervention and reserves.