What is a central bank?
The central bank is a financial institution https://okejfinanse.pl
that is responsible for controlling the country’s https://okejkosmetyki.pl
money supply and for maintaining price stability. https://okejpieniadze.pl
Central banks are created by national governments and usually have a monopoly on the issuance of currency in the country.
Main functions of central banks
- Controlling the money supply
One of the main functions of central banks is to control the money supply in the country. The central bank can regulate the money supply by issuing new money or by adjusting interest rates. When the central bank wants to increase the money supply, it can lower interest rates, which in turn increases lending to businesses and consumers, which contributes to an increase in the money supply. On the other hand, when the central bank wants to reduce the money supply, it can raise interest rates, which in turn discourages people from borrowing and helps to reduce the money supply.
- Interest rate regulation
The central bank can regulate interest rates by making changes to the interest rates that commercial banks must pay for loans from the central bank. If the central bank cuts interest rates, commercial banks are more likely to borrow, which can help boost the economy. On the other hand, raising interest rates can help reduce inflation by reducing the money supply in the economy.