What is the function of a central bank in a country?

A central bank is a national institution responsible for managing a country’s currency, money supply, and interest rates. Its primary function is to ensure economic and financial stability by implementing monetary policy, often through tools like setting interest rates, open market operations, and reserve requirements. Central banks also control inflation, stabilize the national currency, and promote employment. In addition, they act as a lender of last resort to commercial banks and maintain financial system liquidity. Central banks typically issue the national currency and regulate banking institutions to ensure they operate soundly. In some countries, they also manage foreign exchange reserves and contribute to broader economic planning to support sustainable growth and financial confidence.