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

Aso said there was a broad agreement among financial officials that the current slowdown should be temporary as long as the Fed and other central banks carry through with their plans to provide support for growth. Martin Crutsinger, The Seattle Times, "Leading finance officials acknowledge global slowdown," 12 Apr. 2019 In the week ahead, the U.S. will see fresh data on the housing market and Brazil’s central bank will release a key policy decision. Wsj Staff, WSJ, "Economy Week Ahead: Housing Data, the Federal Budget and More," 17 Mar. 2019 The central bank continues to view a housing crash as a key risk to the financial system. Kim Mackrael, WSJ, "Canada Cools Its Housing Market—but Frustrates Home Buyers," 24 Dec. 2018 Transcripts of more than 50 interviews with top Federal Reserve officials and staffers offer an inside view of central bank-operations over the past 50 years, including internal debates and pressures from the White House. David Harrison, WSJ, "Interview Transcripts Tell Story of Fed Over Past 50 Years," 12 Apr. 2019 The country attracting the most Ukrainians has been Poland, population 38 million, where some 1.2 million Ukrainians now work, according to the central bank. Mstyslav Chernov, The Seattle Times, "Ukrainian workers, seeing little hope at home, head abroad," 25 Mar. 2019 The pouch, carried by Komid officials’ wives about to fly out of Uganda, was taken into the custody of Uganda’s Foreign Ministry, which placed the gold bars in Uganda’s central bank, these people say. Joe Parkinson, WSJ, "Never Take Their Photos: Tracking the Commandos, North Korea’s Secret Export," 9 Dec. 2018 The agencies will relinquish some policymaking responsibilities to China’s central bank. Keith Bradsher, New York Times, "China to Name New Central Bank Chief as It Seeks Continuity Amid Change," 18 Mar. 2018 Photo: Federal Reserve WASHINGTON—Federal Reserve Chairman Jerome Powell underscored the importance of the Fed’s nonpartisan independence during an online forum for teachers hosted at the central bank’s headquarters on Wednesday night. Paul Kiernan, WSJ, "Powell Lauds Fed’s ‘Precious’ Independence From Politics," 7 Feb. 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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Last Updated

19 May 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

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

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Rhyming Dictionary: Words that rhyme with central bank

Britannica.com: Encyclopedia article about central bank

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