Which central bank in the United States is responsible for conducting monetary policy?

The Federal Reserve is the central bank responsible for conducting monetary policy in the United States.

Created by the Federal Reserve Act in 1913, the Federal Reserve System was designed to provide a more flexible and stable financial system after repeated banking panics, including the Panic of 1907. It has a Board of Governors in Washington, D.C., 12 regional Federal Reserve Banks, and the Federal Open Market Committee, or FOMC.

The FOMC sets the stance of U.S. monetary policy, chiefly by targeting the federal funds rate. Changes in that interest-rate target influence borrowing costs, financial conditions, spending, investment, employment, and inflation. The Fed also supervises certain banks, supplies currency, supports payment systems, and acts as a lender of last resort in particular circumstances.

A frequent confusion is that the Federal Reserve and the U.S. Treasury are the same institution. They are not: the Treasury manages federal finances and government debt, while the Fed is the nation’s central bank. The Fed is designed to operate with policy independence, although Congress established its legal framework.