Federal Reserve Bank - An Overview

The Federal Reserve Bank, also known as the Federal Reserve or the Fed, is the central banking system of the United States. Established in 1913 by an act of Congress, its primary purpose is to enhance the stability of the American banking system and promote the effective operation of the U.S. economy. The Fed performs five key functions to achieve these goals;

Conducting Monetary Policy: The Federal Reserve sets interest rates, manages the money supply, and regulates financial markets to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy.

Promoting the Stability of the Financial System: The Fed monitors and engages in the U.S. and abroad to minimize and contain systemic risks, ensuring the stability of the financial system.

Supervising and Regulating Financial Institutions: The Federal Reserve promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole.

Fostering Payment and Settlement System Safety and Efficiency: The Fed works to promote a safe, efficient, and accessible system for U.S. dollar transactions through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments.

Promoting Consumer Protection and Community Development: The Federal Reserve advocates for consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.

The Federal Reserve System consists of three main entities: the Board of Governors, 12 Federal Reserve Banks, and the Federal Open Market Committee. The Board of Governors is responsible for setting interest rates and managing the money supply, while the Federal Reserve Banks serve as regulators of various financial institutions, lenders of last resort for banks that lack enough money in reserves, and operators of U.S. payments for both Automated Clearing House and wire transfers. The Federal Open Market Committee is responsible for overseeing the nation's monetary policy.