central bank


Definition of central bank

: a national bank that operates to establish monetary and fiscal policy and to control the money supply and interest rate

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Other Words from central bank

central banker noun

Examples of central bank in a Sentence

Recent Examples on the Web

The Fed’s benchmark rate currently stands in a range of 2.25% to 2.5% after the central bank raised rates four times last year. Washington Post, "Asian shares advance after Fed signals US rate cut likely," 11 July 2019 Wall Street will be listening closely to Federal Reserve Chairman Jerome Powell’s remarks to Congress this week to see if the central bank head offers any clarity about the likelihood of a rate cut this month following a strong June jobs report. NBC News, "Fed head Powell wants to talk policy, but he can't avoid politics," 9 July 2019 Cetinkaya’s term as central bank chief had another year to run. Jason Karaian, Quartz, "Turkey’s president is testing his ability to bend the economy to his will," 7 July 2019 Gold jumped further Wednesday as investors saw Mr. Trump's Fed picks as yet another sign the U.S. central bank won't be raising interest rates anytime soon. Aimee Picchi, CBS News, "Trump Fed pick wants to revive the gold standard. Here's what that means," 3 July 2019 In addition, the central bank last week raised limits on how much commercial paper brokerages could sell, opening up a bigger channel for banks to raise funds. WSJ, "Key Chinese Lending Rate Hits Lowest Since 2009," 26 June 2019 Historically, at such times the central bank has often raised rates preemptively, shutting down the possibility of a prolonged period of low unemployment to avoid accelerating inflation. Jared Bernstein, Vox, "Low-income communities are finally feeling the expansion. The Fed is noticing.," 26 June 2019 Under India’s central bank norms, a borrower is tagged a wilful defaulter if on failure to meet repayment obligations despite having the capacity to repay, or if the loan is not used for the purpose it was availed for in the first place. Sangeeta Tanwar, Quartz India, "A flamboyant Indian industrialist is now chased by a bank his ancestor founded," 17 June 2019 As inflation came back under control in the early 1980s, the conventional wisdom became that central bank independence was key to avoiding it. Matthew Yglesias, Vox, "Judy Shelton’s potential nomination to a Federal Reserve Board seat, explained," 5 June 2019

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'central bank.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of central bank

1841, in the meaning defined above

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Statistics for central bank

Last Updated

14 Jul 2019

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The first known use of central bank was in 1841

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More Definitions for central bank

central bank


Financial Definition of central bank

What It Is

A central bank is an institution responsible for determining the monetary policy of a nation or group of nations.

How It Works

Exact duties vary by country, but generally a central bank's main goals are to maintain a stable currency, control inflation and maximize employment through the promotion of reasonable economic growth.

Examples include the Federal Reserve Bank (U.S.), the European Central Bank (EU) and the Bank of Japan (Japan).

Central banks have several methods of controlling monetary policy, but the three most basic and widely used tools are short-term target rates, open market operations, and capital requirements.

Short-term rate changes are the most publicly followed central bank actions. Entities with a fiat currency (a currency backed by the full faith of the issuer) can loan as much money to banks as they want. The lower the rate, the more banks want to borrow in order to lend to consumers. Thus, by changing the short-term rate target a central bank can influence the amount of lending and borrowing in a country.

Open market operations are another key economic influence. With this method, the central bank either buys or sells Treasury bonds. Buying Treasuries puts money into circulation and selling Treasuries removes it -- thereby increasing or decreasing the supply of money in an economy.

The last tool is the use of capital requirements. Commercial banks take in deposits and then loan it out at higher interest rates. But they don't necessarily loan out one dollar for every dollar they take in; banks are required to keep a certain amount of capital on hand in order to safely cover a surge in withdrawals from customers. Increasing this capital requirement results in less money being available for lending -- thus potentially slowing an economy. Likewise, lowering the capital requirement leads to a greater amount of funds being available for borrowing.

Why It Matters

Central banks are the heart of a country's monetary policy, and their actions exert considerable influence on every aspect of a country's economy. Thus, central banks are key in ensuring boom and bust cycles do not hurt the long-term direction of their respective economies and ensuring steady, stable economic growth.

Source: Investing Answers

central bank


English Language Learners Definition of central bank

: a bank that does business with other banks and with the government and that controls a country's money supply and interest rates

central bank

Legal Definition of central bank

see bank

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Rhyming Dictionary: Words that rhyme with central bank

Britannica.com: Encyclopedia article about central bank

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