What is the role of a central bank?

The role of a central bank is multifaceted and crucial in maintaining stability and promoting economic growth. Central banks are primarily responsible for managing a country's money supply, controlling inflation, and maintaining price stability. They achieve this by regulating interest rates, conducting monetary policy, and supervising commercial banks. Central banks also act as a lender of last resort, providing emergency liquidity to financial institutions during times of crisis. They oversee the payment system, ensuring smooth and efficient transactions. Additionally, central banks play a vital role in foreign exchange markets, maintaining the stability of the national currency and managing exchange rate fluctuations. Lastly, central banks often act as custodians of national gold reserves and may serve as advisors to the government on economic matters. Overall, central banks act as the backbone of a nation's monetary system, striving to foster economic stability and growth.