Central bank

A public institution that manages a country’s money supply and issues currency. It typically conducts monetary policy and supports financial stability.

Monetary policy: Actions by a central bank or other authority to influence money, credit, and economic conditions. It is the central bank’s main framework for steering inflation and economic activity.
Fiat money: Money whose value rests chiefly on legal and social acceptance rather than a commodity convertibility promise. Modern central banks issue or oversee currency that is not backed by a fixed quantity of gold.
Inflation targeting: A monetary-policy framework that publicly commits to a numerical inflation objective. It gives many central banks a clear benchmark for setting policy.
Federal Reserve: The central banking system of the United States, established by the Federal Reserve Act of 1913. Its regional structure and dual mandate make it a prominent national model.
Inflation: A sustained increase in the general price level that reduces money’s purchasing power. Central banks commonly seek to keep inflation low and predictable.
Policy rate: An interest rate set or targeted by a central bank to guide short-term borrowing costs. Changing this rate transmits monetary policy to lending and spending.
Monetary base: Currency in circulation plus commercial banks’ reserves held at the central bank. It is the narrowest core measure of central-bank money.
Financial stability: A condition in which the financial system can absorb shocks and continue providing essential services. Supporting this condition is a common central-bank responsibility alongside price stability.
European Central Bank: The central bank responsible for monetary policy in the euro area. It sets policy for a currency union whose members retain separate national governments.
Unemployment: The condition of people without work who are available for and seeking employment. Interest-rate policy can affect labor demand, making employment part of policy trade-offs.

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