Sterilization

Sterilization incorporates the actions taken by a country's central bank that aim to neutralize the affects foreign exchange operations cause in a currency's value. If capital inflows to a country faster than it outflows, the currency can appreciate which would lead to the loss of competitiveness, and inflation might become a problem. In this case, the central bank may need to intervene to the economy to counteract these changes and preserve macroeconomic stability.