What it is
The Federal Reserve, often called "the Fed," is the central banking system of the United States. Established in 1913, it operates independently within the government to ensure financial stability and promote economic growth. Its primary functions include conducting monetary policy to influence interest rates and the money supply, supervising and regulating banks, maintaining the stability of the financial system, and providing financial services to the U.S. government and depository institutions.
The Fed's actions directly impact financial markets and the broader economy. Through its monetary policy decisions, such as adjusting the federal funds rate, the Fed influences borrowing costs for consumers and businesses, affecting spending and investment. Its communications, like statements from the Fed Chair or FOMC minutes, are closely watched by investors for clues about future policy direction, influencing asset prices from stocks to bonds and cryptocurrencies.
Why it matters
The Fed's decisions on interest rates and money supply directly affect your borrowing costs, investment returns, and the overall economic outlook.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice