Central Bank

A central bank is the main financial institution that helps manage a country’s money system. In simple terms, a central bank helps control interest rates, money supply, inflation, and financial stability. Central banks are important because their decisions can affect borrowing costs, prices, jobs, banks, and financial markets. When inflation is too high, a central bank may raise interest rates. When the economy is weak, it may lower interest rates to support borrowing and spending. For example, the Federal Reserve is the central bank of the United States, and the Bank of England is the central bank of the United Kingdom. A central bank is not the same as a regular bank. Regular banks serve customers and businesses, while a central bank mainly manages monetary policy and supports the financial system.