Central banks, the 4 most influential worldwide

Oluwatoni Olujinmi

24 March 2023

In every country or region, there is an authoritative institution that is in charge of managing the economy and the currency. These establishments lack the market orientation and competitive nature of commercial and investment banks. When it comes to the economy, many governments’ central banks worry about inflation. They help to stabilize prices and interest rates.

The majority of central banks around the world are autonomous, although they are ultimately responsible to their federal governments and, by extension, their constituents. This article looks at several of the major central banks.

Table of Contents

The major central banks worldwide

The following are the major and most influential central banks worldwide

European Central Bank (ECB)

In 1999, the ECB (European Central Bank) came into being. Alterations to the ECB’s monetary policy are determined by the institution’s governing council. The 19 national central bank governors in the Eurozone make up the remainder of the council’s membership.

Whenever the European Central Bank decides to alter interest rates, it often informs the market well in advance through news releases and other statements. The central bank’s job is to maintain price stability and steady economic growth. The European Central Bank (ECB) has a different goal from the Federal Reserve, which is to keep inflation below 2% each year.

In addition to protecting its export market, the European Central Bank (ECB) has an interest in keeping its currency from appreciating too rapidly.

Council meetings of the European Central Bank occur every other week. Conventionally, major policy decisions are made at gatherings that also feature a press conference. A total of eleven meetings take place each year.

U.S. Federal Reserve System (Fed)

The United States’ central bank is the Federal Reserve System, or simply the Fed. Some regard the institution as the world’s most powerful central bank. Given that the dollar is utilized in over 90% of global currency transactions, the Federal Reserve’s influence can significantly shift the value of other currencies. The U.S. government relies on it to ensure that the economy runs smoothly and in the public’s benefit.

The Federal Reserve is responsible for promoting the nation’s monetary policy, ensuring the stability of the financial system, protecting the health of individual financial institutions, ensuring the integrity of the nation’s payment and settlement systems, and monitoring laws meant to safeguard consumers. Also, it’s divided into three distinct categories, which are;

The Federal Reserve Bank, which is made up of 12 regional banks responsible for managing the economy in their respective regions. The Federal Reserve Board regulates and oversees these financial institutions. They are present in the following cities: Dallas, San Francisco, Chicago, Boston, St. Louis, Kansas City, Minneapolis, New York, Philadelphia, Atlanta, Cleveland, and Richmond.

The Federal Open Market Committee (FOMC): All 12 reserve bank presidents and board members make up the FOMC. The Federal Open Market Committee holds eight meetings every year to discuss monetary policy, financial system stability, and the state of the economy.

The Board of Governors: They are put forward by the President of the United States and ratified by the Senate. Although they operate alone, they are responsible directly to Congress. Their task is to uphold the Fed’s objectives.

Bank of England (BOE)

The Bank of England (BoE) is the central bank of the United Kingdom and serves the British government as the official banking institution for monetary affairs. The BoE’s central offices are in Threadneedle, in London’s financial district, which is also the basis of its nickname, ” the old lady of Threadneedle Street.”

The Bank of England is among the oldest banks worldwide. It was founded in 1694 as a private entity and remained private for 250 years until it was nationalized in 1946. In 1998, the BoE evolved to become an independent public organization wholly owned by the Treasury Solicitor.

In addition, the Bank of England serves as the official custodian of the gold of the United Kingdom and other central banks around the world. The bank’s gold vaults contain about 400,000 gold bars worth more than 200 billion pounds. This represents about 3 percent of all gold mined in history.

Bank of Japan (BOJ)

BOJ (Bank of Japan) operations started in 1882. Its purpose is to protect the financial system and keep prices stable in Japan.

Japan relies heavily on exports. Thus the Bank of Japan (BOJ) takes avoiding a too strong currency even more seriously than the European Central Bank (ECB). There are a total of eight people on the bank’s monetary policy committee, including the governor and two deputy governors.

On occasion, the central bank has been known to sell its currency on the open market. This, in order to devalue it relative to the U.S. dollar and the euro. When the Bank of Japan is worried about the strength or volatility of the yen, it makes its concerns known loudly and clearly. It holds eight meetings every year.

Why are they so important

Some of the world’s most major central banks are included in the preceding list. Their mandates are similar. Despite the fact that they may have different goals, organizational structures, and deadlines to fulfill those goals.

Specifically, this role requires them to monitor their countries’ financial systems and currencies to make sure they are stable and prosperous. These financial institutions frequently collaborate to keep the global economy stable.