Keeping our economy safe and sound
Congress established the Federal Reserve System in 1913 as the nation’s central bank to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve System, also referred to as the Fed, comprises 12 independent, regional Reserve Banks positioned throughout the United States, the Board of Governors in Washington DC, and the Federal Open Market Committee (FOMC).
The Federal Reserve is a strange animal. It’s really the third central bank established in US history. The first and second “banks of the United States” failed in the 19th century, and it was the turbulence of the financial markets at the beginning of the 20th century that led to the creation of the Federal Reserve, an innovative hybrid system of federal and regional entities.
Our decentralized structure helps us monitor economic conditions closely and understand the challenges facing communities, industries, and small businesses in different parts of the country. We are independent by design, shielded from political changes in the federal government, so that we have great flexibility in responding to financial crises and other forces, such as the COVID-19 pandemic. In times of crisis, we ensure that money keeps flowing through the economy, and we do what we can to soften the impact of the fluctuations of financial markets.
Congress gave the Fed what is called a dual mandate, and we pursue it mainly by influencing interest rates and financial conditions:
- price stability so that your dollar is worth about the same tomorrow as it is today
- maximum employment so that as many people who want jobs have jobs
How the Fed works