Define: Central Bank

A central bank is a financial institution that is responsible for managing a country’s money supply, controlling interest rates, and ensuring the stability of the financial system.

The primary role of a central bank is to maintain price stability and control inflation. It also acts as a lender of last resort to commercial banks, regulates the banking sector, and manages the country’s foreign exchange reserves.

In many countries, central banks are designed to be independent from the government to ensure their decision-making is free from political influence. However, the level of independence can vary depending on the country’s legal framework.

Yes, the central bank has the authority to print money or create electronic money. However, this power is exercised cautiously to avoid excessive inflation and maintain the stability of the currency.

The central bank controls interest rates by adjusting the benchmark interest rate, also known as the policy rate. By increasing or decreasing this rate, the central bank influences borrowing costs for individuals, businesses, and banks.

In some cases, central banks can lend money to the government, but this practice is often limited to specific circumstances and subject to legal restrictions. It is important to maintain a balance to avoid excessive government borrowing from the central bank, which can lead to inflation.

Yes, the central bank can intervene in the foreign exchange market to stabilize the value of the domestic currency. It may buy or sell foreign currencies to influence exchange rates and maintain competitiveness in international trade.

The central bank is responsible for implementing consumer protection regulations in the financial sector. It ensures that banks and other financial institutions treat customers fairly, provide transparent information, and resolve disputes effectively.

Yes, the central bank is accountable to the government, the public, and sometimes to the judiciary. It is subject to audits, reports to the government or parliament, and may face legal consequences if it acts outside its mandate or violates the law.