A central bank is the public institution that issues currency, holds reserve balances for commercial banks, operates the core payment system, and conducts monetary policy. It often also acts as lender of last resort and supervises parts of the financial system.

In the United States, the central bank is the Federal Reserve System, created by the Federal Reserve Act of 1913.[1] Central banks create base money, not the broad money that households and firms use. Most broad money is created by commercial banks.[2]

Sources

  1. United States Congress. Federal Reserve Act. Federal Reserve. 1913. View source Accessed Nov 11, 2026.
  2. Bank of England. Money in the modern economy: an introduction. Bank of England Quarterly Bulletin. 2014. View source Accessed Nov 11, 2026.