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DW (English)
  • 3 months ago
Central banks control monetary policy, interest rates and the financial system. They supervise banks, secure payment transactions, and stabilize markets in times of crisis. What exactly does the 'bank of banks' do for the economy?
Transcript
00:00What is a central bank?
00:03A central bank is a country's monetary authority.
00:06It issues the national currency, typically banknotes, as well as coins.
00:12That's why it's the bank of issue.
00:15Think of it as a bank of banks.
00:17It doesn't serve individuals, but works primarily with commercial banks and the government.
00:23In the United States, the central bank is the Federal Reserve, the Fed.
00:28In the Euro area, it's the European Central Bank, the ECB.
00:34Central banks manage monetary policy.
00:37They set key interest rates and regulate the money supply to keep prices stable and fight inflation.
00:45They also oversee commercial banks, helping ensure that risky financial practices don't destabilize the system.
00:52In the U.S., the Fed has another mandate, supporting the economy.
00:57When growth slows, it can lower interest rates to make borrowing easier for consumers and businesses, ideally boosting spending and investment.
01:06During a financial crisis, central banks can step in.
01:10If commercial banks face insolvency, they can provide emergency loans to prevent a domino effect.
01:17That's what happened during the 2008 financial crisis.
01:21Almost every country has a central bank.
01:24One exception is Panama, which uses the U.S. dollar and operates without its own note-issuing institution.
01:31One exception
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