Central Banks

The Central Bank is often referred to as the government's bank.

Key Interest Rate referred also as the overnight rate. The overnight rate is the rate at which major financial institutions borrow and lend one-day funds among themselves. Interest rates for consumer loans and mortgages and the exchange rate of a currency are all affected by changes in the overnight rate.

Central Banks hold a meeting monthly to fix the key interest rate which can be increased, decreased or maintained. They ussually issue a statement with the rate annoucement. The rate decision has a great impact on financial markets.






An Hawkish economic outlook refers to high interest rates, high inflation. Hawkish is derived from the agressive nature of the hawk.

A Dovish economic outlook refers to low interest rates, stable inflation. Dovish is derived from the peaceful nature of the dove.


Central Bank Roles

• Regulates the country's monetary policy
• Issues and prints notes and coins in circulation
• Regulates inflation and price stability
• Provides liquidity to commercial banks
• Controls the credit supply
• Ensures the financial system of the country's stabibility
• Determines interest rates

There are 8 major Central Banks in the world

• European Central Bank (ECB)
• Bank of England (BOE)
• Bank of Japan (BOJ)
• Swiss National Bank (SNB)
• Bank of Canada (BOC)
• Reserve Bank of Australia (RBA)
• Reserve Bank of New Zealand (RBNZ)