A report on Central bank

The Eccles Federal Reserve Board Building in Washington, D.C. houses the main offices of the Board of Governors of the United States' Federal Reserve System
The European Central Bank building in Frankfurt
Central bank independence versus inflation. This often cited research published by Alesina and Summers (1993) is used to show why it is important for a nation's central bank (i.e.-monetary authority) to have a high level of independence. This chart shows a clear trend towards a lower inflation rate as the independence of the central bank increases. The generally agreed upon reason independence leads to lower inflation is that politicians have a tendency to create too much money if given the opportunity to do it. The Federal Reserve System in the United States is generally regarded as one of the more independent central banks
Sealing of the Bank of England Charter (1694), by Lady Jane Lindsay, 1905.
The Bank of England, established in 1694.
Walter Bagehot, an influential theorist on the economic role of the central bank.
The Bank of Finland in Helsinki
The headquarters of the People's Bank of China (established in 1948) in Beijing.

Institution that manages the currency and monetary policy of a state or formal monetary union,

- Central bank
The Eccles Federal Reserve Board Building in Washington, D.C. houses the main offices of the Board of Governors of the United States' Federal Reserve System

88 related topics with Alpha

Overall

Clockwise from top-left: Federal Reserve, Bank of England, European Central Bank, Bank of Canada

Monetary policy

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Policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing or the money supply, often as an attempt to reduce inflation or the interest rate, to ensure price stability and general trust of the value and stability of the nation's currency.

Policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing or the money supply, often as an attempt to reduce inflation or the interest rate, to ensure price stability and general trust of the value and stability of the nation's currency.

Clockwise from top-left: Federal Reserve, Bank of England, European Central Bank, Bank of Canada
Banknotes with a face value of 5000 in different currencies. (United States dollar, Central African CFA franc, Japanese yen, Italian lira, and French franc)
Reproduction of a Song dynasty note, possibly a Jiaozi, redeemable for 770 mò.
Yield curve becomes inverted when short-term rates exceed long-term rates.
2016 meeting of the Federal Open Market Committee at the Eccles Building, Washington, D.C.
Mechanics of open market operations: Demand-Supply model for reserves market
1979 $10,000 United States Treasury bond
A run on a Bank of East Asia branch in Hong Kong, caused by "malicious rumours" in 2008.
Gold certificates were used as paper currency in the United States from 1882 to 1933. These certificates were freely convertible into gold coins.
The Bank of Japan, in Tokyo, established in 1882.
The Bank of Finland, in Helsinki, established in 1812.
The headquarters of the Bank for International Settlements, in Basel (Switzerland).
The Reserve Bank of India (established in 1935) Headquarters in Mumbai.
The Central Bank of Brazil (established in 1964) in Brasília.
The Bank of Spain (established in 1782) in Madrid.

The central bank influences interest rates by expanding or contracting the monetary base, which consists of currency in circulation and banks' reserves on deposit at the central bank.

China M2 money supply vs USA M2 money supply

Money supply

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In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time.

In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time.

China M2 money supply vs USA M2 money supply
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M2 as a % of GDP
Individual Consumer Loans at All Commercial Banks, 1990–2008
CPI-Urban (blue) vs M2 money supply (red); recessions in gray
HKD vs USD over the year
Japanese money supply (April 1998 – April 2008)
M4 money supply of the United Kingdom 1984–2007. In thousand millions (billions) of pounds sterling.
The euro money supplies M0, M1, M2 and M3, and euro zone GDP from 1980–2021. Logarithmic scale.
MB, M1 and M2 from 1959 to 2021 (all shown in billions) Link. Note that before April 24, 2020 savings accounts were not part of M1
M0, M1 and M3. US-GDP and M3 of Eurozone for comparison. Logarithmic scale.
Money supply decreased by several percent between Black Tuesday and the Bank Holiday in March 1933 when there were massive bank runs across the United States.
M2 vs CPI
The money supply of Australia 1984–2016
New Zealand money supply 1988–2008
Components of the money supply of India in billions of Rupee for 1950–2011
U.S. M3 money supply as a proportion of gross domestic product.

The central bank of a country may use a definition of what constitutes legal tender for its purposes.

Two golden 20 kr coins from the Scandinavian Monetary Union, which was based on a gold standard. The coin to the left is Swedish and the one on the right is Danish.

Gold standard

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Monetary system in which the standard economic unit of account is based on a fixed quantity of gold.

Monetary system in which the standard economic unit of account is based on a fixed quantity of gold.

Two golden 20 kr coins from the Scandinavian Monetary Union, which was based on a gold standard. The coin to the left is Swedish and the one on the right is Danish.
Gold certificates were used as paper currency in the United States from 1882 to 1933. These certificates were freely convertible into gold coins.
The British gold sovereign or £1 coin was the preeminent circulating gold coin during the classical gold standard period.
Huge quantities of $20 double eagles were minted as a result of the California gold rush.
The US dollar was said to be on a limping standard due to huge quantities of Morgan silver dollars continuing to circulate at par with gold dollars despite their silver value being less.
William McKinley ran for president on the basis of the gold standard.
Ending the gold standard and economic recovery during the Great Depression.
Gold prices (US dollars per troy ounce) from 1914, in nominal US dollars and inflation adjusted US dollars.

From the more widespread acceptance of paper money in the 19th century emerged the gold bullion standard, a system where gold coins do not circulate, but authorities like central banks agree to exchange circulating currency for gold bullion at a fixed price.

Germany experienced deposit interest rates from 14% in 1973 down to almost 2% in 2003

Interest rate

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Amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed .

Amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed .

Germany experienced deposit interest rates from 14% in 1973 down to almost 2% in 2003
The effective federal funds rate in the US charted over more than half a century

The central banks of countries generally tend to reduce interest rates when they wish to increase investment and consumption in the country's economy.

Price inflation (CPI year-on-year) in the United States from 1914 to 2018.

Inflation

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General increase in the prices of goods and services in an economy.

General increase in the prices of goods and services in an economy.

Price inflation (CPI year-on-year) in the United States from 1914 to 2018.
Inflation in countries around the world in 2019.
UK and US monthly inflation rates from January 1990 to March 2022.
US historical inflation and deflation (in green) from the mid-17th century to the end of the 20th.
US Consumer Price Index (CPI) 1969 to 2019, obtained from the FRED Database. Inflation is the increase in the CPI.
Inflation and the growth of money supply (M2)
US corporate profits as a proportion of GDP (blue) and year-over-year change in the Consumer Price Index (red) 2017-2022
US prices of crude oil and gasoline in February and March, 2022
Restaurant increasing prices by $1.00 due to inflation
The U.S. effective federal funds rate charted over fifty years
Two 20 krona gold coins from the Scandinavian Monetary Union, a historical example of an international gold standard
Inflation rates among members of the International Monetary Fund in April 2022.
UK and US monthly inflation rates from January 1989 to the present.

Generally, these monetary authorities are the central banks that control monetary policy through the setting of interest rates, by carrying out open market operations and (more rarely) changing commercial bank reserve requirements.

Mechanics of open market operations: Demand-Supply model for reserves market

Open market operation

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Mechanics of open market operations: Demand-Supply model for reserves market

In macroeconomics, an open market operation (OMO) is an activity by a central bank to give (or take) liquidity in its currency to (or from) a bank or a group of banks.

Obverse of a Federal Reserve $1 note issued in 2009

Federal Reserve

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Obverse of a Federal Reserve $1 note issued in 2009
Ben Bernanke (lower-right), former chairman of the Federal Reserve Board of Governors, at a House Financial Services Committee hearing on February 10, 2009. Members of the board frequently testify before congressional committees such as this one. The Senate equivalent of the House Financial Services Committee is the Senate Committee on Banking, Housing, and Urban Affairs.
Organization of the Federal Reserve System
Board of governors in April 2019, when two of the seven seats were vacant
Map of the 12 Federal Reserve Districts, with the 12 Federal Reserve Banks marked as black squares, and all Branches within each district (24 total) marked as red circles. The Washington, DC, headquarters is marked with a star. (Also, a 25th branch in Buffalo, NY, was closed in 2008.)
The 12 Reserve Banks buildings in 1936
Plaque marking a bank as a member
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Newspaper clipping, December 24, 1913
Total Net WorthBalance Sheet of Households and Nonprofit Organizations 1949–2012
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Consumer price index vs M2 money supply increases
United States unemployment rates 1975–2010 showing variance between the fifty states
Federal Reserve remittance payments to the treasury
Federal Reserve total assets, treasury bonds, and mortgage-backed securities, 2002–2021
Total combined assets for all 12 Federal Reserve Banks, 2007–2009
Total combined liabilities for all 12 Federal Reserve Banks, 2007–2009
Money supply decreased significantly between Black Tuesday and the Bank Holiday in March 1933 when there were massive bank runs across the United States
The Federal Reserve raising the Federal Funds Rate above U.S. Treasury interest rates creates an inverted yield curve causing recessions.
Federal reserve assets held
Other assets
US Treasuries
Mortgage-backed security

The Federal Reserve System (also known as the Federal Reserve or simply the Fed) is the central banking system of the United States of America.

Banknotes with a face value of 5000 in different currencies. (United States dollar, CFA franc, Japanese yen, Italian lira, and French franc)

Banknote

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Type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand.

Type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand.

Banknotes with a face value of 5000 in different currencies. (United States dollar, CFA franc, Japanese yen, Italian lira, and French franc)
Song Dynasty Jiaozi, the world's earliest paper money.
A Yuan dynasty printing plate and banknote with Chinese words.
Marco Polo described the use of early banknotes in China to Medieval Europe in his book, The Travels of Marco Polo.
The first paper money in Europe, issued by the Stockholms Banco in 1666.
The sealing of the Bank of England Charter (1694). The Bank began the first permanent issue of banknotes a year later.
Fifty-five-dollar bill in Continental currency; leaf design by Benjamin Franklin, 1779
The Bank of England gained a monopoly over the issue of banknotes with the Bank Charter Act of 1844.
Collage for banknote design with annotations and additions to show proposed changes (figure rather higher so as to allow room for the No.), Bank of Manchester, UK, 1833. On display at the British Museum in London
A$5 note issued by Citizens Bank of Louisiana in the 1850s.
When Brazil changed currencies in 1989, the 1000, 5000, and 10,000 cruzados banknotes were overstamped and issued as 1, 5, and 10 cruzados novos banknotes for several months before cruzado novo banknotes were printed and issued. Banknotes can be overstamped with new denominations, typically when a country converts to a new currency at an even, fixed exchange rate (in this case, 1000:1).
Obverse and reverse of an old American $100 note (1928)
A former Finnish 10 mark banknote from 1980, depicting President J. K. Paasikivi.
A 2000 Romanian lei polymer banknote
Bielefeld Germany 25 Mark 1921. Silk Banknote.
Russian American Company-issued Alaskan parchment scrip (c. 1852)
A 5 euro note so badly damaged it has been torn in half. The note has later been repaired with tape.
Fed Shreds as souvenir from the Federal Reserve Bank of San Francisco
Shreds of unfit US dollar notes with a typical size of less than 1.5 mm x 16 mm
Shredded and briquetted US dollar notes from the Federal Reserve Bank of New York (approx. 1000 pieces, 1 kg)
Shredded and briquetted US dollar notes from the Federal Reserve Bank of New York (approx. 1000 pieces, 1 kg)
Shredded and briquetted euro banknotes from the Deutsche Bundesbank, Germany (approx. 1 kg)

Commercial banknotes have primarily been replaced by national banknotes issued by central banks or monetary authorities.

Reserve requirement

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A reserve requirement is a central bank regulation that sets the minimum amount that a commercial bank must hold in liquid assets.

Yuan dynasty banknotes are a medieval form of fiat money.

Fiat money

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Type of currency that is not backed by any commodity such as gold or silver.

Type of currency that is not backed by any commodity such as gold or silver.

Yuan dynasty banknotes are a medieval form of fiat money.
Song Dynasty Jiaozi, the world's earliest paper money.

State-issued money which is neither convertible through a central bank to anything else nor fixed in value in terms of any objective standard.