The Principal Functions of Central Banks
January covers the roles of a Central Bank; how it controls the currency, how it maintains adequate foreign exchange reserves, and how it acts as a lender of last resort.
Overview
Central banks, also known as ‘banks of banks’, reserve banks or central monetary authorities – of a nation or, as in the case of the Eurozone, a currency bloc – control currencies through printing and coining; monitor and control money supply and inflation (largely through setting interest rates); hold foreign reserves; act as bank regulators; and act as lenders of last resort.
Key learning objectives:
What are the principal functions of central banks?
How do central banks control currencies?
How do central banks influence inflation?
How do interest rates influence foreign exchange reserves?
What functions do central banks carry out as regulators?
Explain central banks’ clearing and lender of last resort functions
Summary
Expert
January Carmalt
January began her career in 1999 with Bank of America in Charlotte, NC. From the Credit Products team, she moved into fixed income bond research covering Telecoms and Financials. While in London, January focused on financial institutions bond research until her Director and head bond analyst role at Deutsche Bank. As of 2011, January has worked as a freelance writer.
