Sterilization (redirected from sterilisation)

Sterilization

The process of a central bank or federal reserve insulating itself from the foreign exchange market to counteract the effects of a changing monetary base.

Notes:

For example, to weaken the U.S. dollar against another currency, the Fed would sell more U.S. dollars and buy the foreign currency. The increased supply of the U.S. dollar lowers the value of the currency. The Fed would do the opposite if it wanted to strengthen the U.S. dollar.

See also: Central Bank, FOREX, Federal Reserve, Monetary Policy, Sterilized Intervention