How do central banks control inflation and interest rates?

Central banks control inflation and interest rates through several tools. They raise interest rates to cool down spending and reduce inflation, making borrowing more expensive. Conversely, they lower rates to stimulate economic growth during downturns. Central banks also conduct open market operations, buying or selling government securities to adjust money supply. Additionally, they set reserve requirements for banks, controlling how much money banks must hold versus lend. These mechanisms influence overall economic activity and price levels. While traditional finance uses these tools, cryptocurrency operates differently—decentralized networks don't have central banks, though some blockchain projects implement algorithmic mechanisms to manage token supply and stability.