Central banks are national institutions that manage a country’s currency, money supply, and interest rates. They are tasked with maintaining financial stability, controlling inflation, and fostering economic growth. Examples include the U.S. Federal Reserve and the European Central Bank.
Central banks set interest rates to influence borrowing and spending. They regulate commercial banks and act as a lender of last resort during financial crises. Their decisions directly affect the financial system and overall economic health.
One of the primary goals of a central bank is to maintain price stability. Through tools like open market operations and reserve requirements, they aim to control inflation while ensuring that the economy has enough liquidity to function effectively.
Central banks play a critical role in global finance. Their policies can impact exchange rates, international trade, and even the financial decisions of other countries. Their announcements are closely monitored by investors and policymakers around the world.
Did you know? The oldest central bank still operating today is Sweden’s Riksbank, established in 1668.