When using indirect intervention, a central bank is likely to focus on:

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When using indirect intervention, a central bank is likely to focus on interest rates. Indirect intervention refers to the use of monetary policy tools like interest rates to influence exchange rates, rather than directly buying or selling currency. By adjusting interest rates, central banks can affect the demand for their currency and indirectly influence its exchange rate. This can help to make exports more attractive, stimulate economic growth, or prevent currency fluctuations from destabilizing the economy. In contrast, inflation and income levels are more likely to be the focus of direct economic policies and interventions, while expectations of future exchange rates may be influenced by a variety of factors, including political events, economic indicators, and market sentiment.

When Using Indirect Intervention, a Central Bank Is Likely to Focus