central bank

noun

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 central bank, too, has announced steps to make funds available to shadow banks and mutual funds. Prathamesh Mulye, Quartz India, "Who benefits, and by how much, from India’s $266 billion economic stimulus," 14 May 2020 This week is full of potentially market-moving events, including meetings for several of the world's largest central banks. Ryan W. Miller, USA TODAY, "Coronavirus live updates: US deaths top 56K; Texas, other states weigh reopening; Trump asked about people ingesting disinfectant," 28 Apr. 2020 Several of the world's largest central banks are meeting, including the Bank of Japan, which announced its latest stimulus measures to prop up markets. Stan Choe, The Christian Science Monitor, "As virus lockdowns lift, investors search for signs of rebounds," 27 Apr. 2020 Some fund managers are concerned that problems remain despite the quick work of central banks to ease the funding strains. Caitlin Ostroff, WSJ, "Stress Endures in Market Where Big Companies Turn for Cash," 20 Apr. 2020 But the continuing collapse in financial markets suggests that investors think the reality could be beyond the powers of central banks such as the Fed to stop. Matt Phillips, New York Times, "Markets Plunge as a Global Recession Appears Almost Inevitable," 16 Mar. 2020 In the past year, tame inflation in both Mexico and Brazil has allowed their central banks to take the lead in buttressing weak growth. Nacha Cattan, Bloomberg.com, "Latin America Price Surprise Fails to Move the Dial on Rate Bets," 10 May 2020 The central bank will buy up to $500 billion in bonds issued by large companies, which will be exempt from Congress requirements on other relief recipients to save jobs and limit dividends, executive compensation and stock buybacks. Chronicle Staff, SFChronicle.com, "Coronavirus news from the Bay Area: April 27-28," 29 Apr. 2020 When the central bank launched its Main Street Lending Program, which will provide four-year loans to businesses with fewer than ten thousand employees, colleges and other nonprofit organizations cried foul and asked to be included. John Cassidy, The New Yorker, "The Man with the U.S. Economy (and Trump’s Reëlection Chances) in His Hands," 28 Apr. 2020

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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Time Traveler for central bank

Time Traveler

The first known use of central bank was in 1841

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Last Updated

1 Jun 2020

Cite this Entry

“Central bank.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/central%20bank. Accessed 2 Jun. 2020.

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More Definitions for central bank

central bank

noun

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

noun

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

More from Merriam-Webster on central bank

Rhyming Dictionary: Words that rhyme with central bank

Britannica.com: Encyclopedia article about central bank

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