Have you ever wondered about the functions the Fed performs in its role as the central bank of the United States? The 10th edition of The Federal Reserve System Purposes & Functions (Off-site) provides an overview of the structure, responsibilities and aims of the U.S. central banking system.
Below are the five key functions the Fed performs to promote the effective operation of the U.S. economy and to serve the public interest. Click on the links for more information, including videos where available.
- Fostering payment and settlement system safety and efficiency (Off-site): The Federal Reserve works to promote a safe, efficient and accessible system for U.S. dollar transactions. In this role, the Fed helps to maintain the integrity of U.S. payment systems by keeping cash, check and electronic transactions moving reliably and securely. Another element of this role includes the Fed acting as a “bank for banks” and as the “government’s bank.” Federal Reserve Bank Services support this function.
- Conducting monetary policy (Off-site): The Federal Open Market Committee sets U.S. monetary policy in accordance with three specified goals from Congress: to promote maximum employment, stable prices and moderate long-term interest rates in the U.S. economy.
- Promoting financial system stability (Off-site): In 1913, The Federal Reserve was created to promote greater financial stability and help avoid banking panic. Today, the Federal Reserve continues to monitor financial system risks and engages at home and abroad to help ensure the system supports a healthy economy for U.S. households, communities and businesses.
- Supervising and regulating financial institutions and activities (Off-site): The Federal Reserve promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole.
- Promoting consumer protection and community development (Off-site): The Federal Reserve advances supervision, community reinvestment and research to increase understanding of the impacts of financial services policies and practices on consumers and communities. To perform this responsibility, the Fed performs a number of tasks to implement various consumer protection, fair lending, fair housing and community reinvestment laws and to improve understanding of the dynamics of the consumer financial market place.