What is the role of a central bank in the economy?

A central bank plays a crucial role in the economy by managing the country’s money supply, controlling inflation, and ensuring financial stability. It sets interest rates, which influence borrowing and spending behavior throughout the economy. Central banks are also responsible for regulating and supervising financial institutions to maintain the integrity of the financial system. Additionally, they often act as a lender of last resort during times of economic crisis, providing financial support to prevent systemic collapse. The central bank’s actions significantly impact inflation, unemployment, and economic growth.