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What is the Federal Reserve?

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Quick answer

The Federal Reserve is the central bank of the United States. It manages the money supply, sets key interest rates, and works to keep prices stable and employment high — making it one of the most powerful economic institutions in the world.

Key things to understand

  1. It's the central bank of the U.S., often just called 'the Fed'.
  2. It sets interest rates that ripple through loans, savings, and markets.
  3. Its goals are stable prices and maximum employment.
  4. It also supervises banks and helps keep the financial system stable.

People also ask

What does the Federal Reserve do?
It sets interest rates, manages the money supply, supervises banks, and aims for stable prices and full employment.
Why does the Fed raise interest rates?
Higher rates cool borrowing and spending, which helps slow inflation when prices rise too fast.
Is the Federal Reserve part of the government?
It's an independent institution created by Congress — public in purpose but insulated from day-to-day politics.