A central bank is the ‘sovereign’ bank of a state. The UK’s central bank is the bank of England, the USA’s is the Federal Reserve and Japan’s is the Bank of Japan. The role of a central bank is to decide on monetary policy: how much money to print and when and to decide what the interest rate should be.
Central banks have varying degrees of political independence. The Bank of England is charged by the British government to achieve inflation at 2%. If inflation moves more than 1% either side of this figure the governor of the Bank or England (currently Mark Carney) must write a letter to the Chancellor of the Exchequer.
The eurozone has a central bank to decide on the monetary policy of the euro. The European Central Bank (ECB) is based in Frankfurt.
Central banks will also have a management role in the economy, providing research, guidelines and regulations on banking in their jurisdiction as well as liaising with other central banks worldwide.