European Central Bank

The European Central Bank, headquartered in Frankfurt, Germany is one of the most influential central banks worldwide. The bank was created in 1998 to serve as a central bank for the 15 European Union countries that started using the Euro as their currency. The ECB assumed the role of central bank for these countries on January 1st, 1999, and became responsible for the monetary policy in the euro zone. The European Central Bank importance is warranted by the fact, that the euro economic zone is second only to the United States economy. The ECB is designed to be politically independent from both European Union institutions and from euro zone countries.

The main goals of the European Central Bank are to maintain price stability in the euro zone, to achieve a low-level of unemployment and to facilitate economic growth with low inflation.

ECB Monetary Policy

The main responsibility of the European Central Bank is to design and apply the euro zone monetary policy. The ECB implements its monetary policy by influencing short-term interest rates, thus trying to control economic activity. The ECB influences interest rates through its open market operations, effectively controlling the money supply in the market. The goal of European Central Banks is to keep inflation rates close to, but below 2% per year over.

ECB Foreign Reserves and Foreign Exchange Operations

The European Central Bank is responsible for the euro zone foreign reserves. The ECB does foreign exchange operations including, but not limited to foreign exchange interventions. The foreign exchange interventions are performed to keep the euro rising too much or going to low versus other currencies.

ECB Payment and Settlement Systems

The European Central Bank is responsible for the smooth operation of the payment and settlement systems in the euro zone, which is a cornerstone for sound financial system and stable currency.

ECB Financial Stability

The bank promotes financial stability within the euro zone and monitors the developments within various financial markets, in order to register any threats to the system.

ECB Banknotes

In the beginning of 1999 the Euro became currency for 15 European Union countries. Both ECB and the national central banks of the participating countries can issue euro banknotes, but in reality only the national central banks do this.

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