Next video:
Loading the player...

The Federal Reserve System is the central bank of the United States. It regulates monetary policy and supervises the nation’s banking system.

The Fed includes the central Board of Governors and 12 regional Federal Reserve Banks.

Among the Fed’s main duties is its responsibility to make sure the money supply doesn’t grow too quickly or too slowly. It uses monetary policy to control that growth. The Fed can change reserve requirements, which are the percentages of deposits that banks must retain. It can also change the interest rate, called the discount rate, paid by member banks when they borrow money. Or it can buy or sell Treasury securities to increase or decrease the money supply.

The Fed’s other duties include regulating banks and protecting the credit rights of consumers. It maintains the financial system’s stability, and it provides the U.S. government with financial services.

The Fed works independently from the government, which uses fiscal policy to regulate economic conditions.

Related Articles
  1. Personal Finance

    What Does a Central Bank Do?

    A central bank oversees a nation’s monetary system.
  2. Trading

    How Do Central Banks Inject Money Into The Economy?

    Central banks inject money into the banking system, and remove money from it, through monetary policy actions.
  3. Insights

    The Federal Reserve System Affects You More Than You Might Think

    How does the Federal Reserve System affect ordinary citizens? In more ways than you might realize.
  4. Insights

    How The Federal Reserve Manages Money Supply

    Find out how the Fed manages bank reserves and this contributes to a stable economy.
  5. Insights

    What Does the Federal Reserve Do?

    What is the Federal Reserve System and how does it affect interest rates, inflation and the market?
  6. Insights

    What's the 1913 Federal Reserve Act?

    The 1913 Federal Reserve Act was a pivotal congressional act that helped establish the Federal Reserve System as it exists today. It is one of the United States financial system’s most influential ...
  7. Taxes

    The Link Between The Fed, Money, Debt And Taxes

    Assets on the Fed's balance sheet, money supply level, national debt level and economic production should be maintained in equilibrium.
Hot Definitions
  1. Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange ...
  2. Revolving Credit

    A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is ...
  3. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
  4. Contango

    A situation where the futures price of a commodity is above the expected future spot price. Contango refers to a situation ...
  5. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  6. Acid-Test Ratio

    A stringent indicator that indicates whether a firm has sufficient short-term assets to cover its immediate liabilities. ...
Trading Center