The Fed Explained: What the Central Bank Does

The Federal Reserve System is the central bank of the United States. It performs five general
functions to promote the effective operation of the U.S. economy and, more generally, the public
interest. The Federal Reserve
• conducts the nation’s monetary policy to promote maximum employment and stable prices in
the U.S. economy;
• promotes the stability of the financial system and seeks to minimize and contain systemic
risks through active monitoring and engagement in the U.S. and abroad;
• promotes the safety and soundness of individual financial institutions and monitors their
impact on the financial system as a whole;
• fosters 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; and
• promotes 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.