three major tools the Bank uses to implement monetary policy

three major tools the Bank uses to implement monetary policy: 1. Open Market Operations: Through open market operations, the Bank buys or sells securities in the secondary market in order to achieve a desired level of Bank reserves. Alternatively, the Bank injects money into the economy through buying securities in exchange for money stock. As the law of supply and demand takes effect to determine the costof credit (interest rates) in the money market, money stock adjusts itself to the desired level. This process influences availability of money in the economy. 2. Discount window operations: The Bank, as lender of last resort, may provide secured short-term loans to commercial banks on overnight basis atpunitive rates, thus restricting banks to seek funding in the market resorting to Central Bank funds only as a last solution. The discount rate is set by the Central Bank to reflect the monetary policy objectives. 3. Reserve Requirements: TheCentral Bank is empoweredby the law to retain a certain proportion of commercial banks' depositsto be held as non-interest bearing reserves at the Central Bank. An increase in reserve requirements restricts commercial banks ability to expand bank credit and the reverse is regarded as credit easing