The Federal Reserve (the Fed) is the central bank of the United States, established in 1913 to provide a flexible monetary system and prevent banking panics. Dual mandate: maximum employment and price stability (defined as 2% inflation). The Federal Open Market Committee (FOMC) sets monetary policy at 8 meetings yearly. Tools: Federal Funds Rate (overnight bank rate), quantitative easing/tightening (bond purchases/sales), discount window lending, reserve requirements. Chair Jerome Powell (2018-present). Fed decisions cascade through the economy — savings rates, mortgages, business borrowing costs, asset prices. Independent from government but Chair is presidential appointee.
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Federal Reserve
August 22, 2026 · Aditya Gupta
Finance
Related terms
Bond Market
The bond market is the global market for debt securities — US Treasuries, corporate bonds, municipal bonds, mortgage-backed…
Bubble
An asset bubble is a sustained rise in asset prices well above fundamental value, driven by speculation rather…
Comparative Advantage
Comparative advantage is David Ricardo's foundational economic theory: countries should specialize in producing goods where they have the…
Consumer Price Index
The Consumer Price Index (CPI) is the most widely-cited inflation measure in the US — tracking price changes…
Cost of Capital
Cost of capital is the rate of return investors require to provide capital to a business — combining…
Deflation
Deflation is the sustained decline in general price levels — opposite of inflation. Sounds appealing (things get cheaper!)…
