A central bank trying to manage its exchange rate is like a sailor steering a boat in a narrow channel — one wrong move and the current drags you onto the rocks. In this chapter we look at the tools central banks use to fix or guide exchange rates, why those tools sometimes fail, and the deep trade-off every country faces between controlling its own interest rate, keeping its exchange rate stable, and letting money flow freely across borders. This trade-off is so fundamental that economists call it the “impossible trinity” or the monetary trilemma.