What is the primary role of the Federal Reserve?

The primary role of the Federal Reserve is to manage the United States' monetary policy. This responsibility includes controlling the money supply and interest rates, which are critical tools for influencing economic activity. By adjusting these elements, the Federal Reserve aims to promote maximum employment, stable prices, and moderate long-term interest rates.

The Federal Reserve achieves these goals through mechanisms such as open market operations, the discount rate, and reserve requirements. For instance, lowering interest rates can encourage borrowing and investment, helping to stimulate economic growth. Conversely, raising rates can help to cool down an overheating economy and control inflation.

This focus on monetary policy distinguishes the Federal Reserve's role from other aspects of economic management, such as stock market regulation, tax collection, or fiscal policy—each of which is handled by different entities and mechanisms within the government structure.