“Central bank”

definition

A central bank is an autonomous or semi-autonomous institution entrusted with managing a state or monetary union’s monetary supply, currency and interest rates. They usually supervise the local commercial banking system.

Central bank goals include keeping inflation at an optimum level, maintaining the exchange rate at a level conducive to a strong economy and controlling unemployment, .

The world’s most important central banks include the United States Federal Reserve (Fed), the European Central Bank (ECB), the Bank of Japan (BOJ), the People’s Bank of China (PBoC) and the Bank of England (BoE).

In the wake of the 2008 Global Financial Crisis the Bank of Japan, the Federal Reserve, Bank of England and the European Central Bank all implemented extensive quantitative easing (QE) programmes, pouring huge amounts of ‘new’ money into the economy by purchasing financial assets. QE policies had a massive impact on currencies.

After the ECB QE announcement in early 2015, which added some €1.1 trillion to the ECB’s balance sheet over the course of the following 18 months, the euro nose-dived against the U.S. dollar, reaching near parity at 1.06 in March 2015.