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

Keep scrolling for more

Other Words from central bank

central banker noun

Examples of central bank in a Sentence

Recent Examples on the Web

Other major economic headlines will bring key news for the central bank, from a Treasury refunding to bellwether earnings reports. Fortune, "Why the Next 9 Days Are So Critical for the U.S. Economy," 26 Apr. 2018 Harbour Asset Management Head of Fixed Income Christian Hawkesby discusses Adrian Orr's rise from teen motel owner to New Zealand central bank governor. Bloomberg, "What to Expect From Incoming RBNZ Governor Orr," 20 Mar. 2018 The oil-exit proposal from Norway's central bank, which manages the wealth fund, shook oil stocks around the world when in was announced in November, including Total. Mikael Holter, Houston Chronicle, "More to Big Oil than just oil, says Total," 16 Feb. 2018 The Fed tracks a different index, the personal consumption expenditures price index excluding food and energy,which has consistently undershot the central bank's 2 percent target since mid-2012. Jordan Blum, Rye Druzin, Houston Chronicle, "June dip in fuel prices coming to an end," 25 June 2018 Its central bank nonetheless raised rates twice in May to stabilise the rupiah. The Economist, "Why countries like Argentina and Turkey fret about exchange rates," 21 June 2018 The nation’s cleanup of initial coin offerings and Bitcoin exchanges has almost been completed, the newspaper said, citing Sun Hui, an official at the Shanghai branch of the central bank. Fortune, "Bitcoin Meltdown: Cryptocurrencies Lost $42 Billion in Value Over the Weekend," 11 June 2018 And Wall Street sees more hikes this year and next, pushing up the central bank's key rate to an even more attractive 3%. Adam Shell, USA TODAY, "How to find best interest rates on CDs, savings accounts," 5 June 2018 Italy's public debt stood at 2.3 trillion euros at the end of March, according to the nation's central bank. Bard Wilkinson, CNN, "Italian President summons Carlo Cottarelli as election turmoil deepens," 28 May 2018

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.

See More

First Known Use of central bank

1841, in the meaning defined above

Keep scrolling for more

Learn More about central bank

Share central bank

Statistics for central bank

Last Updated

6 Oct 2018

Look-up Popularity

Time Traveler for central bank

The first known use of central bank was in 1841

See more words from the same year

Keep scrolling for more

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

See words that rhyme with central bank

Britannica.com: Encyclopedia article about central bank

Comments on central bank

What made you want to look up central bank? Please tell us where you read or heard it (including the quote, if possible).

WORD OF THE DAY

playful or foolish behavior

Get Word of the Day daily email!

Test Your Vocabulary

Autumn Words of the Day 2018

  • a-top-down-image-of-road-through-an-autumn-forest
  • Which is a synonym of fugacious?
True or False

Test your knowledge - and maybe learn something along the way.

TAKE THE QUIZ
SCRABBLE® Sprint

Test Your Knowledge - and learn some interesting things along the way.

TAKE THE QUIZ

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!