The central bank holds crucial responsibilities in regulating the money supply and maintaining financial stability. Key roles include:

1. Monetary Policy Implementation
   The central bank formulates and implements monetary policy to control inflation and stabilize the currency. This involves adjusting interest rates and conducting open market operations to influence the money supply. For example, lowering interest rates can boost borrowing and spending, while raising them can help control inflation.
2. Regulation and Supervision
   Central banks oversee and regulate banks and financial institutions to ensure they operate safely. This includes setting reserve requirements, conducting stress tests, and enforcing compliance with financial regulations. Effective supervision helps prevent bank failures and maintain confidence in the financial system.
3. Financial Stability
   The central bank maintains financial stability by monitoring systemic risks and acting as a lender of last resort. Providing liquidity to banks during crises prevents bank runs and ensures the smooth functioning of financial markets.
4. Issuance of Currency
   Central banks are responsible for issuing and managing the national currency, ensuring an adequate money supply and replacing old or damaged notes.
5. Managing Foreign Exchange Reserves
   Central banks manage foreign exchange reserves to support the national currency and manage exchange rate fluctuations, often intervening in foreign exchange markets.

By fulfilling these responsibilities, central banks ensure economic stability and foster sustainable growth.