The Federal Reserve System is the central banking system of the United States of America.
The body was established by Congress more than a century ago, when President Woodrow Wilson signed the Federal Reserve Act into law on December 23, 1913. Prior to the creation of the Fed, the U.S. economy was plagued by frequent episodes of panic, bank failures, and credit scarcity.
The Fed has supervisory and regulatory authority over many banking institutions. In this role, the body promotes the safety and soundness of the banking system, fosters stability in financial markets, and ensures compliance with laws and regulations under its jurisdiction.
Current functions of the Federal Reserve System are:
To influence monetary policy, the bank has three main tools at its disposal:
Open market operations is the Fed's most frequently used monetary policy tool. This consists of purchasing and selling U.S. government securities on the open market with the aim of aligning the federal funds rate with a publicly announced target set by the Federal Open Market Committee.
Today's Chair of the Board of Governors of the Federal Reserve System is Janet Louise Yellen, an American economist, who has previously served as Vice Chair from 2010 to 2014.