What is a central bank?

Central banks aim to keep prices stable, typically targeting inflation of around 2 percent, and to support a healthy financial system. Their main tool is setting a key interest rate, which influences borrowing costs across the economy. They also issue banknotes, act as lender of last resort to banks in crisis and may buy bonds to inject money, known as quantitative easing. Sweden’s Riksbank, founded in 1668, is the oldest central bank still operating, and the Bank of England followed in 1694. Well-known examples include the US Federal Reserve and the European Central Bank.