Central banking is the practice of a government or central bank controlling and managing its currency, money supply, and interest rates. It is used to help promote economic stability by ensuring that a country’s currency remains stable in value. Central banks also work to maintain an inflation rate that meets their desired target level for price stability.
The most well-known example of central banking is the Federal Reserve System (also known as “the Fed”) in the United States. The Fed was established by Congress in 1913 with the passage of the Federal Reserve Act, which created 12 regional Banks throughout America each responsible for overseeing financial activities within their jurisdiction.
In addition to setting monetary policy through adjusting interest rates, open market operations (OMOs), quantitative easing measures, etc., it acts as lender of last resort; providing emergency liquidity when needed during times of crisis such as 2008 Financial Crisis and responding quickly if there are any imbalances between different parts of economy i.e countries/regions receiving more than they need while other regions not getting enough funds leading to deflationary spiral resulting from lack demand causing prices & wages fall further depressing economic activity – something only central bank can mitigate against via adequate stimulus package thus restoring normalcy/economic growth cycle .
Central bankers have become increasingly important players on global stage due to amount influence they wield over economies at both national & international levels – this has led some commentators suggest replacing traditional gold standard system where currencies are backed up physical assets like gold bullion with one based upon trustworthiness & credibility built up long years service e..g Swiss Franc being regarded amongst strongest around because Swiss National Bank seen having solid track record prudent policies over past century so investors feel confident investing into CHF denominated investments .
