What is the purpose of the Federal Reserve?

The purpose of the Federal Reserve is fundamentally to regulate the nation's monetary policy. Established in 1913, the Federal Reserve System serves as the central bank of the United States and is tasked with managing the country's money supply and interest rates. This includes functions such as controlling inflation, stabilizing prices, fostering maximum employment, and moderating long-term interest rates.

Monetary policy is crucial because it influences economic conditions by adjusting the availability and cost of credit in the economy. The Federal Reserve utilizes various tools, such as open market operations, the discount rate, and reserve requirements, to achieve its monetary policy goals. By managing these aspects, the Federal Reserve plays a vital role in ensuring economic stability and growth, making it distinct from the functions associated with creating laws, managing national security, or overseeing elections.