Central banks - key terms
Central bank
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The monetary authority and major regulatory bank in a country. Its functions include issuing and managing the country's currency
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Central bank intervention
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When a central bank enters the foreign exchange market to buy or sell currency in order to influence exchange rates
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Base rate
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The rate of interest set by the Bank of England, being in effect the lowest rate that lenders will charge interest at.
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Basis point
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One hundred basis points make up a percentage point, so an interest rate cut of 25 basis points might take the rate from 0.5% to 0.25%
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Inflation target
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The target set for the annual rate of consumer price inflation – for the UK the target is CPI inflation of 2%
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Base Money
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Currency (banknotes and coins) in circulation plus minimum reserves credit institutions are required/choose to hold with the central bank
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Bond Market
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The market for interest-bearing securities (with either a fixed or a floating rate and with a maturity of at least one year) that companies and governments issue to raise capital for investment.
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Financial stability
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The condition in which the financial system – comprising financial intermediaries, markets and market infrastructures – is capable of withstanding shocks and the unravelling of financial imbalances
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