The US Federal Reserve (often called the Fed) is the central banking system of the United States, established as an independent institution within the government. It is a hybrid system, combining a governmental Board of Governors in Washington, D.C., with twelve regional Federal Reserve Banks.
The Fed was created by the Federal Reserve Act signed into law by President Woodrow Wilson on December 23, 1913. Its creation was a direct response to a series of financial panics, most notably the Panic of 1907, which exposed the instability of the fragmented U.S. banking system and its "inelastic currency". The Act's goal was to provide a safer, more stable, and more flexible monetary and financial system by creating a central bank that could act as a lender of last resort and prevent bank runs.
The core mechanism of the Fed is its conduct of monetary policy, primarily through the Federal Open Market Committee (FOMC). The FOMC sets a target range for the federal funds rate—the rate at which banks lend reserves to each other overnight—to influence interest rates throughout the economy. The Fed operates under a dual mandate from Congress: to achieve maximum employment and stable prices (low inflation).
The Fed connects to global finance as the central bank for the United States dollar, the world's primary reserve currency. It is structurally similar to the Reserve Bank of India (RBI), which also manages monetary policy and supervises banks. Recent changes include the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, which expanded the Fed's regulatory oversight following the 2008 financial crisis. More recently, the Fed and other regulators have proposed overhauling bank capital rules, replacing the contentious 2023 "Basel III Endgame" proposal with a new framework.