Central banks and monetary policies

A central bank, also called a "reserve bank", is an institution that manages a nation's currency, money supply, and interest rates.

Central banks also usually oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the nation's monetary base, and usually also prints the national currency, which usually serves as the nation's legal tender.

The primary function of a central bank is to manage the nation's money supply (monetary policy), through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis. Central banks usually also have supervisory powers, intended to prevent commercial banks and other financial institutions from reckless or fraudulent behavior. Central banks in most developed nations are institutionally designed to be independent from political interference.

Goals of monetary policy

In the next articles we will analyze the most known central banks:

We will also analyze their history of intervention in the markets and the evolution of their balance sheets.