The Principal Functions of Central Banks

The Principal Functions of Central Banks

January Carmalt

20 years: Research & banking

January covers the roles of a Central Bank; how it controls the currency, how it maintains adequate foreign exchange reserves, and how it acts as a lender of last resort.

January covers the roles of a Central Bank; how it controls the currency, how it maintains adequate foreign exchange reserves, and how it acts as a lender of last resort.

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The Principal Functions of Central Banks

10 mins 8 secs

Overview

Central banks, also known as ‘banks of banks’, reserve banks or central monetary authorities – of a nation or, as in the case of the Eurozone, a currency bloc – control currencies through printing and coining; monitor and control money supply and inflation (largely through setting interest rates); hold foreign reserves; act as bank regulators; and act as lenders of last resort.

Key learning objectives:

  • Explain central banks’ clearing and lender of last resort functions

  • Identify the principal functions of central banks

  • Learn how central banks control currencies and influence inflation

  • Learn how interest rates influence foreign exchange reserves

  • Understand the functions that central banks carry out as regulators

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Expert
January Carmalt

January Carmalt

January began her career in 1999 with Bank of America in Charlotte, NC. From the Credit Products team, she moved into fixed income bond research covering Telecoms and Financials. While in London, January focused on financial institutions bond research until her Director and head bond analyst role at Deutsche Bank. As of 2011, January has worked as a freelance writer.

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