July 23, 2014

Central Bank Explained

A central bank can be viewed as an over-riding bank that has a crucial responsibility to regulate the money supply of an economy, control the value of its currency as well as influence the cost and availability of credit.

Central banks can issue new notes within an economy, put into action the monetary policy as well as oversee the competence of commercial banks.

Examples of central banks include the Federal Reserve in the United States, the Bank of England within the United Kingdom and the European Central Bank. These banks usually operate independently, without political interference and are commonly known for their role in controlling interest rates as part of the monetary policy.