Central bank

A central bank is a financial institution that manages a country's monetary policy, and that often also includes issuing and/or monitoring the currency and regulating the money supply. Central banks also typically act as a lender of last resort to banks in times of financial crisis, and may also supervise and regulate banks and other financial institutions. Examples of central banks include the Federal Reserve in the United States, the European Central Bank, and the Bank of Japan.

The chief task of modern central banks is the maintain low and stable inflation, usually around 2-3%. They do this by adjusting interest rates (generally overnight lending rates) upwards and downwards to restrain or boost lending activity.

Central banks are typically independent in their decision-making, meaning that they operate independently of the government and are not subject to political interference in their monetary policy decisions. This independence is intended to help ensure that central banks can make objective and impartial decisions that are in the best interests of the broader economy, rather than being swayed by short-term political considerations. However, the level of independence can vary from country to country, and in some cases, the government may have more direct influence over the central bank's operations. Among major central banks, the Bank of Japan is one that is not independent.