Page 4 - Material about Central bank

DEFINITION OF CENTRAL BANK

A central bank is a financial institution responsible for managing and controlling a country's
monetary policy. The main function of a central bank is to supervise and manage the money
supply, control interest rates, and ensure domestic economic stability.

Some general characteristics of central banks include:

a. Currency Control
The central bank has the authority to issue and circulate the country's currency.
b. Determining Interest Rates
The central bank sets the basic interest rate or reference interest rate which influences
interest rates in the financial market.
c. Inflation Control
One of the main objectives of the central bank is to ensure price stability and control the
level of inflation in the economy.
d. Regulation and Supervision of Financial Institutions
Central banks usually have a role in regulating and supervising financial institutions such
as commercial banks and other financial institutions.
e. Provision and Management of Foreign Exchange Reserves
The central bank is also responsible for managing the country's foreign exchange
reserves, which can be used to maintain currency stability.
f. Foreign Currency Intervention
The central bank can intervene in the foreign exchange market to influence the exchange
rate of a country's currency.
g. Economic Stabilization
The central bank is responsible for maintaining national economic stability and can take
steps to overcome economic or financial crises.

Some examples of central banks include the Federal Reserve in the United States, the
Bank of England in the United Kingdom, the European Central Bank, and Bank Indonesia in
Indonesia.

4