Most Frequently Asked Questions
- Who owns the Federal Reserve?
The Federal Reserve System is not “owned” by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation’s central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress. Read more
- What is the money supply? Is it important?
The money supply is the total amount of money—cash, coins, and balances in bank accounts—in circulation.
The money supply is commonly defined to be a group of safe assets that households and businesses can use to make payments or to hold as short-term investments. For example, U.S. currency and balances held in checking accounts and savings accounts are included in many measures of the money supply. Read more
- What are the Federal Reserve’s objectives in conducting monetary policy?
The objectives as mandated by the Congress in the Federal Reserve Act are promoting (1) maximum employment, which means all Americans that want to work are gainfully employed, and (2) stable prices for the goods and services we all purchase. In this way, the Fed’s monetary policy decisions truly affect the financial lives of all Americans—not just the spending decisions we make as consumers, but also the spending decisions of businesses—about what they produce, how many workers they employ, and what investments they make in their operations. Read more
- How does monetary policy influence inflation and employment?
In the short run, monetary policy influences inflation and the economywide demand for goods and services—and, therefore, the demand for the employees who produce those goods and services—primarily through its influence on the financial conditions facing households and firms. Read more
- What is the difference between monetary policy and fiscal policy, and how are they related?
Monetary policy refers to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth. Fiscal policy refers to the tax and spending policies of the federal government. Fiscal policy decisions are determined by the Congress and the Administration; the Fed plays no role in determining fiscal policy. Read more
- Why does the Federal Reserve aim for 2 percent inflation over time?
Low and stable inflation helps the economy operate efficiently. The Federal Open Market Committee (FOMC) judges that an annual increase in inflation of 2 percent is most consistent over the longer run with the Federal Reserve’s mandate for price stability and maximum employment.
When inflation is low and stable, individuals can hold money without having to worry that high inflation will rapidly erode their purchasing power. Moreover, households and businesses can make more accurate longer-run financial decisions about borrowing and lending and about saving and investment. Longer-term interest rates are also more likely to be moderate when inflation is low and stable. Read more
- What does it mean that the Federal Reserve is “independent within the government”?
The Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress. The Chair and other staff testify before Congress, and the Board submits an extensive report—the Monetary Policy Report—on recent economic developments and its plans for monetary policy twice a year. The Board also makes public the System’s independently audited financial statements, along with minutes from the FOMC meetings. Read more
- Does the Federal Reserve maintain accounts for individuals? Can individuals use such accounts to pay bills and get money?
No. The Federal Reserve Banks provide financial services to banks and governmental entities only. Individuals cannot, by law, have accounts at the Federal Reserve. Read more
- What is inflation and how does the Federal Reserve evaluate changes in the rate of inflation?
Inflation is the increase in the prices of goods and services over time. Inflation cannot be measured by an increase in the cost of one product or service, or even several products or services. Rather, inflation is a general increase in the overall price level of the goods and services in the economy.
Federal Reserve policymakers evaluate changes in inflation by monitoring several different price indexes. A price index measures changes in the price of a group of goods and services. The Fed considers several price indexes because different indexes track different products and services, and because indexes are calculated differently. Therefore, various indexes can send diverse signals about inflation. Read more
- What is the purpose of the Federal Reserve System?
The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve was created on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law. Today, the Federal Reserve's responsibilities fall into four general areas.
- Conducting the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.
- Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers.
- Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.
- Providing certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions, and playing a major role in operating and overseeing the nation's payments systems.
- I have a problem with my bank. How do I file a complaint against it?
The Federal Reserve urges you to file a complaint if you think a bank has been unfair or misleading, discriminated against you in lending, or violated a federal consumer protection law or regulation. You can file a complaint online through the Federal Reserve's Consumer Complaint Form.
You can also call or email Federal Reserve Consumer Help, the System's central repository for consumer complaints and inquiries, and they will walk you through the process of filing a complaint and answer any questions you might have. Read more
- Which denominations of currency does the Federal Reserve issue?
The Federal Reserve Board currently issues $1, $2, $5, $10, $20, $50, and $100 notes. The largest denomination Federal Reserve note ever issued for public circulation was the $10,000 note. Read more
- How much U.S. currency is in circulation?
There was approximately $1.70 trillion in circulation as of January 31, 2019. This figure includes Federal Reserve notes ($1,655.2 billion), U.S. notes ($0.2 billion), currency no longer issued ($0.2 billion), and coins outstanding ($47.2 billion). Read more
- What is the prime rate, and does the Federal Reserve set the prime rate?
The prime rate is an interest rate determined by individual banks. It is often used as a reference rate (also called the base rate) for many types of loans, including loans to small businesses and credit card loans. On its H.15 statistical release, "Selected Interest Rates," the Board reports the prime rate posted by the majority of the largest twenty-five banks. Although the Federal Reserve has no direct role in setting the prime rate, many banks choose to set their prime rates based partly on the target level of the federal funds rate--the rate that banks charge each other for short-term loans--established by the Federal Open Market Committee. Read more
- How do I determine if a banknote is genuine? What should I do if I think I have a counterfeit note?
The best way to determine whether a note is genuine is to rely on the security features, such as the watermark and security thread. Counterfeit detection pens are not always accurate and may give you false results. To learn about these and other security features in genuine Federal Reserve notes, visit the U.S. Currency Education Program website. Read more