What Is A Central Bank?

A Central bank is a national bank that provides financial and banking services for its country’s government and commercial banking system. Central banks plays a major role in the markets. Interest rates are the most important event to Forex markets and any discussions that take place in the central bank’s announcements can cause huge volatility and drastic movements in the markets within seconds.

What is the role and function of a Central Bank?

  • To set official bank rates used to manage inflation and exchange rates
  • To issue a country’s currency
  • To set targets and monitor economic data while they implement special tools.

One of the special tools that is used by the central bank is Interest/bank rates adjustments. When the Central Bank sees a need to hike or cut their rates, they simply do so. Read more on why do they hike or cut the Rates.

Why Do We (traders) Care?

The biggest factor that shifts the price in the Forex markets is the Interest Rate changes set by the Central Banks. The changes made by the Central Banks in their rates are the indirect response to other indicators/economic data released right throughout the month.

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Check out the latest episode on my Podcast titled “Why you shouldn’t trade with borrowed money”. To read this content on the GO, download the App on Google PlayStore. Below is the table of all central bank’s current Interest Rates.

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