Thursday, June 30, 2022

The Major Central Banks of the World


If you have been following forex and financial market news for a time now, you already know that major central banks around the world are a big deal.

These banks are often the biggest and most influential movers of the forex market. Every decision they make, every statement and press conference, has an effect to the market.

Here are the most major central banks you should follow.

The US Federal Reserve

The Fed is the central bank of the United States, and it’s arguably the most influential central bank in the whole market.

The US dollar stands on the other side of 90% of all currency transactions. As a result, any of the Fed’s decision affect the valuation of the dollar as well as the other currencies.

The Federal Open Market Committee (FOMC) decides the fate of the interest rate, and it consists of seven governors of the Federal Reserve Board as well as five presidents from the 12 district reserve banks.

They meet eight times a year to discuss policy that would fulfill their mandate of maintaining long-term price stability and sustainable growth.

The European Central Bank (ECB)

The ECB came to life in 1999, and its governing council decides what happens to the bank’s monetary policy.

This council has six members of the ECB executive board joined by the governors of all the national central banks of the 12 eurozone countries.

The ECB isn’t known for surprising the markets. Thus, whatever they may be planning to do, they usually give the market thinly veiled hints.

The bank’s mandate is sustainable growth and price stability, but it also tries to maintain annual consumer price growth below 2% because the eurozone is an export-dependent economy.

Two times every week, the policy-setting members meet. However, huge decisions only come out during meetings with accompanying press conferences.

The Bank of England (BOE)

Meanwhile, the BOE has a nine-member Monetary Policy Committee that’s made up of a governor, two deputy governors, two executive directors, and four outside experts.

The BOE has a reputation as one of the most effective central banks. It aims to maintain monetary and financial stability. It also aims to keep prices stable and keep the confidence in the British pound.

 Bank of Japan (BOJ)

Over in Asia, the BOJ is easily the most important central bank. Its monetary policy committee is made up of a governor, two deputy governors, and six other members.

As the country is export-dependent, the BOJ is very serious about preventing the Japanese yen from getting too strong.

Its mandate is to maintain price stability and ensure financial system stability. As a result, the bank’s main focus is inflation.

Swiss National Bank (SNB)

Meanwhile, the Swiss National Bank has a committee that consists of three people who make the all-important interest rate decisions.

Not like many other central banks, the SNB gives the interest rate band instead of providing a target rate.

Like the eurozone and Japan, Switzerland is very dependent on exports. As a result, the SNB also doesn’t want to see its currency from getting too strong. The bank then tends to be more conservative when it comes to rate hikes.