Fed (Federal Reserve System)

The central banking system of the United States, established in 1913 to provide a safe, flexible, and stable monetary and financial system.

What is Fed (Federal Reserve System)?

The Federal Reserve System, commonly known as the Fed, consists of the Board of Governors in Washington, D.C., and 12 regional Federal Reserve Banks located across the country, such as in New York and San Francisco. It was created by the Federal Reserve Act of 1913 in response to financial panics, like the Panic of 1907, to centralize banking oversight and prevent widespread bank failures. The Fed’s structure includes a seven-member Board of Governors appointed by the President and confirmed by the Senate, with the Chair serving a four-year term, renewable, as seen with recent chairs like Jerome Powell.

The Fed operates with a dual mandate from Congress: to promote maximum employment and stable prices, aiming for around 2% inflation annually. It achieves this through tools like setting the federal funds rate, conducting open market operations, and supervising banks to ensure soundness. For instance, during the 2008 financial crisis, the Fed implemented quantitative easing programs, purchasing over $4 trillion in securities to lower long-term interest rates and support recovery.

In 2025, the Fed continues to monitor economic indicators like GDP growth (projected at 2.1% for the year) and unemployment (around 4.2%), adjusting policies accordingly, such as the recent rate cuts from 5.25-5.50% to 4.75-5.00% in September 2025 to combat slowing growth.