U.S. Central Bank

As the nation’s central bank, the Federal Reserve System has three major responsibilities: monetary policy, payments services, and the supervision and regulation of financial institutions.

Monetary Policy

Using the tools of monetary policy, the Federal Reserve can affect the volume of money and credit and their price, that is, interest rates. In this way, it influences employment, output, and the general level of prices. The goals of monetary policy are maximum employment, stable prices, and moderate long-term interest rates.

Payments Services

The Federal Reserve provides payments services in two capacities: as a bankers’ bank and as the U.S. government’s bank.

As a bankers’ bank, the Federal Reserve serves financial institutions, much as commercial banks serve their customers.

In this role, Reserve Banks:

These services promote the smooth functioning of the financial system and the efficiency and technological development of the payments system.

As the U.S. government’s bank, the Federal Reserve:

Banking Supervision and Regulation

The Federal Reserve works with federal and state financial authorities to supervise and regulate the U.S. banking system. The Fed’s main objectives in this role are to ensure the safety and soundness of the banking system, to protect consumers in credit activities, and to enforce banking laws and regulations.

Its activities include: