Sterilised Intervention

Sterilised intervention is a central bank buying or selling foreign currency and then offsetting the effect on domestic money with a second transaction in its own market, so that the operation changes its reserves and acts on the exchange rate without changing the domestic money supply. Unsterilised intervention leaves that second leg undone, and the money supply moves with it. The distinction matters because the two work through different channels. Unsterilised intervention alters domestic monetary conditions, which is a familiar mechanism; sterilised intervention leaves them alone and is instead argued to work through the mix of assets the market is left holding and through the signal it sends about policy intent. Whether it has a lasting effect on the rate is a genuinely contested question in the economic literature rather than a settled one. And whether any particular operation was sterilised is visible only in the central bank's own reporting of its reserves and domestic operations, published on its own schedule — not in the price.