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