Central Bank

A central bank is a Financial Institution that oversees and manages a country’s currency, Money Supply, and Interest Rates. It is responsible for implementing monetary policy, regulating Financial Institutions, maintaining financial stability, and providing financial services to the government and commercial banks.

Central banks typically have the authority to issue currency, manage inflation, and act as a lender of last resort. They play a crucial role in the economic framework of a country, influencing overall economic activity through policy tools.

Examples

• Federal Reserve (United States): Manages the U.S. monetary policy, regulates banks, and provides financial services to the government.
• European Central Bank (ECB): Responsible for monetary policy within the Eurozone, aiming to maintain price stability across member countries.
• Bank of England: The central bank of the UK, managing the country’s monetary policy and issuing banknotes.

Cases

• Quantitative Easing (QE): Used by various central banks, such as the Federal Reserve, during economic downturns to inject Liquidity into the economy by purchasing financial Assets.
• Interest Rate Changes: Central banks adjust Interest Rates to control inflation or stimulate economic growth. For instance, the ECB lowered rates to coMBAt low inflation in the Eurozone.
• Currency Stabilization: Central banks may intervene in foreign exchange markets to stabilize their currency. The Swiss National Bank often acts to prevent excessive appreciation of the Swiss franc.