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Abstract Until the Second World War the Bank of Portugal (BoP) was a long way from possessing the features normally associated with a central bank. It was still a commercial bank, albeit one that had acquired some central bank functions. The war period was decisive in removing this ambiguity. The change was caused mostly by an unusually large influx of international means of payment (gold and foreign exchange) as a consequence of Portugal’s neutrality during the war. However, all of this happened during a very troubled period for the BoP, thanks to the collapse of the gold-exchange standard. The BoP adapted quickly to the new environment of discretion, government interference, and nationalism, although in a relatively original way: it followed the trend but at the same time retained certain features of a central bank still committed to gold standard principles. The two essential objectives of the BoP were to keep the value of the Portuguese currency stable and to keep interest rates low in order to encourage economic growth. The bank was successful on both counts during the war and the postwar period using a series of non-conventional instruments.