Central bank is a financial institution that regulates monetary policy, currency issuance, and banking operations of a country.
A central bank is a financial institution responsible for managing a country's currency, monetary policy, and commercial banking system. It is often referred to as the "banker's bank" because it provides banking services to other banks and financial institutions. The central bank is usually owned by the government, but it operates independently of political influence.
The primary function of a central bank is to regulate the money supply and maintain price stability in the economy. It achieves this by setting interest rates and controlling the amount of money in circulation. Central banks also play a critical role in issuing and managing the national currency, acting as a lender of last resort to commercial banks, and maintaining the stability of the financial system.
Central banks also act as the government's banker and fiscal agent. They hold and manage the government's accounts and oversee the issuance of government debt. They also play a crucial role in international trade by managing foreign exchange reserves and intervening in the foreign exchange market to stabilize the value of the national currency.
The Federal Reserve is the central bank of the United States, while the European Central Bank (ECB) is responsible for the eurozone. Other notable central banks include the Bank of Japan, the Bank of England, and the People's Bank of China. Central banks play a crucial role in the functioning of modern economies, and their policies have a significant impact on financial markets and the broader economy.