The Federal Reserve is the central bank of the United States, created by Congress in 1913 after a series of banking panics. Its dual mandate is maximum employment and stable prices, with stable prices defined since 2012 as 2% annual inflation measured by the PCE index. The Federal Open Market Committee, with twelve voting members, meets eight times a year to set the federal funds rate, its main tool; raising rates slows borrowing and inflation but risks recession, while cutting rates supports jobs but may lift inflation. During the 2008 crisis and the 2020 pandemic, the Fed bought Treasury and mortgage-backed securities to push down long-term rates, and it also serves as lender of last resort, bank supervisor and operator of payment systems such as FedNow, launched in 2023. It does not set tax or spending policy and cannot target individual prices like gas or groceries.
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