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European Central Bank
The European Central Bank (ECB for short), headquartered in
Frankfurt am Main, is an institution of the European Union and is
responsible for monetary policy and price stability in the European
currency area.
Its primary objective is to ensure an inflation rate of around 2%.
An essential instrument for stabilizing the inflation rate is its
interest rate policy. With the help of this policy, the ECB can
control the amount of money in circulation, i.e., put more or less
money into circulation, which directly influences the inflation
rate. For example, if more money is in circulation, the money is
worth less, and the inflation rate increases.
The key interest rate plays an important role here. The key interest
rate is the interest rate at which commercial banks can borrow and
invest money from the ECB. If, for example, the interest rate
increases, banks borrow less money from the ECB, and the economic
environment calms down.
In addition, the ECB manages the official foreign reserves of the EU
member states and promotes the uncomplicated payment system in
Europe. The ECB is independent and cannot be influenced by politics.
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