What is the role of central banks?

The role of central banks includes several key functions:

1. Monetary policy: Central banks manage monetary policy by setting the official interest rate and controlling the money supply. This involves influencing commercial bank rates and, consequently, consumer spending and business investment to stimulate economic growth or control inflation^[1].

2. Financial stability: They act as the government's banker and serve as the 'lender of last resort' for commercial banks during liquidity crises, thereby ensuring stability in the banking system^[1].

3. Banking supervision: Central banks regulate and supervise the banking industry, ensuring that banks operate safely and soundly, which helps maintain public confidence in the financial system^[1].

4. Payments system: They manage or supervise payment systems and interbank clearing systems, facilitating smooth transactions in the economy^[1].

5. Economic research and advice: Central banks often engage in economic research and statistical collection, and they provide advice to the government on financial policy^[1].

6. Additional functions: They may also be involved in ensuring financial consumer protection and fighting against bank fraud, money laundering, and terrorism financing^[1].

These roles contribute to the overall goal of maintaining price stability and supporting economic growth within their jurisdictions^[1].