The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve System performs five general functions to promote the effective operation of the U.S. economy and the public interest:
- Conducting monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy.
- Promoting the stability of the financial system and seeking to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad.
- Promoting the safety and soundness of individual financial institutions and monitoring their impact on the financial system as a whole.
- Fostering payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments.
- Providing banking services to the U.S. government, supervising and regulating banks and other important financial institutions, and maintaining the stability of the financial system.
The Federal Reserve System is composed of three key entities: the Board of Governors, 12 Federal Reserve Banks, and the Federal Open Market Committee. The Board of Governors provides general guidance for the System and oversees the 12 Reserve Banks. The Federal Reserve Banks are each responsible for a specific geographic area of the U.S. and provide banking services to the depository institutions in their respective districts. The Federal Open Market Committee is the Feds monetary policy-making body and manages the country's money supply.
