Central Bank
A national institution that manages monetary policy, controls money supply, and acts as a lender of last resort to the banking system.
A central bank is the apex monetary authority of a country or currency union. Key examples include the Federal Reserve (U.S.), ECB (Eurozone), Bank of England, Bank of Japan, and People's Bank of China.
Central banks set policy rates, manage foreign-exchange reserves, and regulate the money supply. Their decisions shape the interest rate environment that ultimately prices every asset. Traders track central bank communications obsessively because forward guidance can move markets as much as actual policy changes.
Related Terms
Federal Reserve
The U.S. central bank — its rate decisions and forward guidance move global markets more than any other single institution.
BeginnerHawkish
A monetary policy stance favouring higher interest rates and tighter financial conditions to combat inflation — the opposite of dovish.
IntermediateInterest Rate
The cost of borrowing money, set or influenced by central banks — the single most powerful lever in macroeconomics.
BeginnerMonetary Policy
Central bank actions — rate changes, asset purchases, reserve requirements — designed to control inflation and support employment.
BeginnerQuantitative Easing (QE)
A central bank's large-scale asset purchases that inject liquidity into the system and push down long-term interest rates.
Intermediate