Why is monetary policy transmitted through the banking system?

Monetary policy is transmitted through the banking system because banks play a crucial role in the flow of money within the economy. When central banks adjust interest rates or implement quantitative easing, it influences banks' lending and borrowing rates. This, in turn, affects the availability and cost of credit for consumers and businesses, impacting spending and investment decisions. Ultimately, these changes in financial conditions help achieve broader economic goals, such as controlling inflation and promoting employment.