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The Fed Explains the Central Bank

Fed ExplainedJust as architects and builders rely on detailed plans, so too did the creators of the nation's important institutions, including the Federal Reserve System. The structure and functions of the U.S. central bank are the subject of the latest installment in the Atlanta Fed's animated video series.

The Fed was designed to operate independently within the government. Its unique structure allows it to make long-term policies without undue influence from short-term political pressures.

Although the Fed plays a critical role in creating the conditions for a stable, growing economy, the central bank alone doesn't have all the tools to support economic growth. The Fed conducts monetary policy, which are actions that influence the supply and cost of money and credit. Meanwhile, the U.S. Congress conducts fiscal policy, meaning it makes important decisions about taxes and spending.

In addition to conducting monetary policy, the Fed supervises and regulates banks and provides payment services to banks and the federal government. Think of these jobs as the three legs of a stool—together they help keep the economy stable.

To learn more about the central bank's history, structure, and main functions, watch the video here. Also, visit the Fed Explained page for a host of useful resources about key economic concepts and the work of the Fed.

January 30, 2013