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The FX Bootcamp Guide to Strategic and Tactical Forex Trading by Wayne McDonell

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GLOBAL MONEY FLOW

Central banks are in charge of maintaining a stable economy for their nation. They study the economic data on an ongoing basis.
If their economies grow too quickly, prices surge and everything becomes far too expensive. To slow their economies to a reasonable pace with fairly stable prices, these banks have many tools at their disposal, the most visible of which is raising interest rates.
This makes money more expensive and slows the economy down thereby keeping prices at healthy levels.
Conversely, if the economy is growing too slowly, a central bank has the ability to lower interest rates, thereby making money cheaper and often easier to obtain. This spurs borrowing, which spurs spending, which spurs the economy and increases demand.

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