Central Banking

Central banking refers to the system of monetary authority and governance responsible for overseeing and managing a nation’s currency, money supply, and interest rates. Central banks are crucial institutions in a country’s economic framework, as they implement monetary policy to achieve macroeconomic objectives such as controlling inflation, managing employment levels, and ensuring financial stability. They also regulate and supervise the banking sector and may act as a lender of last resort during financial crises.

Central banks typically have the authority to issue currency, manage government accounts, and conduct open market operations to influence liquidity in the economy. Examples of prominent central banks include the Federal Reserve in the United States, the European Central Bank in the Eurozone, and the Bank of England in the United Kingdom. Each operates independently from the government to ensure that their policies are not influenced by political pressures, which helps maintain economic stability and public confidence in the financial system.