The operational boundary between a central bank’s monetary policy and a state treasury’s fiscal policy is critical for preserving institutional credibility and price stability.

Fiscal dominance occurs when a country’s public debt levels rise to a point where the central bank can no longer raise interest rates to fight inflation, because doing so would push the government into bankruptcy or default.

[Sovereign Debt Skyrockets] ---> Central Bank Captive to Government Budget Costs ---> Prevented From Raising Rates ---> Inflation Expectations Unanchor

To maintain separation and prevent Debt Monetization, central banking statutes globally legally prohibit the direct purchase of government bonds from state treasuries on the primary market. All asset accumulation must occur through independent transactions on secondary markets to insulate policy choices from state funding demands.