Central Bank

A central bank is a national or regional institution that manages a country’s currency, money supply, and interest rates. It is responsible for regulating the banking system, maintaining financial stability, and implementing monetary policy to control inflation, stabilize the currency, and support economic growth. Central banks also serve as the lender of last resort to banks during financial crises. Major functions include issuing currency, setting interest rates, managing foreign exchange reserves, and regulating commercial banks.

Example

The U.S. Federal Reserve adjusts interest rates to control inflation and stimulate or slow down economic growth as needed, using tools like the federal funds rate.