Sterilization
Definition
Actions taken by a central bank to offset the domestic monetary impact of foreign exchange market interventions. When a central bank buys or sells foreign currency, sterilization involves offsetting open market operations to prevent unintended changes to the money supply.
Example
Sterilization prevents intervention from causing unwanted inflation by offsetting newly created domestic currency with bond sales.
Related Terms
Frequently Asked Question
What is Sterilization in Forex?
Sterilization is a central bank technique to neutralize the money supply effects of forex intervention. After intervening in currency markets, the bank executes offsetting operations to maintain the original monetary stance.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.