Definition
The Federal Reserve System conducts monetary policy, supervises many financial institutions, supports payment systems, and promotes financial stability.
Political Dictionary
Federal Reserve
The Federal Reserve is the central bank of the United States.
Why It Matters
Its decisions affect inflation, employment, credit, banking, and interest rates.
How It Works
The system includes the Board of Governors, twelve regional Reserve Banks, and the Federal Open Market Committee.
History
Congress created the Federal Reserve in 1913 after repeated banking crises.
Example
The Federal Open Market Committee may change its target for the federal funds rate.
Common Misconceptions
- The Federal Reserve is a private commercial bank.
- It directly sets tax rates.
- It can spend federal budget money without Congress.
Related Terms
- Fiscal Policy
- Monetary Policy
- Inflation
- Economic Growth
- Government Spending
Related Topics
See Also