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    Federal Reserve

    Also known as The Fed, Federal Reserve System, Federal Reserve Board

    The Federal Reserve is the US central bank, created in 1913, made up of a Board of Governors in Washington and 12 regional Reserve Banks.[1] It sets monetary policy to pursue maximum employment and stable prices, which it defines as 2% inflation on the PCE measure.[2][3] Under Chairman Kevin Warsh, who took office in May 2026, it raised its policy rate to 3.75-4.00% on September 16, 2026.[4][5]

    Editor reviewedStrict sourcingUpdated Markets and tradingTech policy
    Key facts

    The Federal Reserve, usually called the Fed, is the central bank of the United States. Congress created it with the Federal Reserve Act of 1913.[1] Its interest rate decisions affect borrowing costs, stock and bond prices and the dollar, which is why markets watch it closely.[6] This page is not financial advice.

    Structure

    The Federal Reserve System has two main parts. The Board of Governors is a federal agency in Washington, D.C., and there are 12 regional Federal Reserve Banks.[1] The President nominates the seven governors and the Senate confirms them for 14-year terms. The Chair and the two Vice Chairs are chosen from among the governors and serve four-year terms in those roles.[7]

    As of October 2026 the Board was:

    • Chairman Kevin Warsh
    • Vice Chair Philip Jefferson
    • Vice Chair for Supervision Michelle Bowman
    • Governors Michael Barr, Lisa Cook, Jerome Powell and Christopher Waller[8]

    Warsh took office as Chairman on May 22, 2026, for a term ending May 21, 2030. He was previously a governor from 2006 to 2011.[4]

    Interest rate decisions are made by the Federal Open Market Committee. Its voters are the seven governors, the president of the New York Fed and four other Reserve Bank presidents who rotate each year.[9]

    What it does

    The Fed lists five functions:

    • conducting monetary policy
    • promoting financial stability
    • supervising and regulating financial institutions
    • keeping payment and settlement systems safe and efficient
    • promoting consumer protection and community development[10]

    For monetary policy, the Federal Reserve Act sets the goals of maximum employment, stable prices and moderate long-term interest rates. These are commonly called the dual mandate.[2] The FOMC defines price stability as 2% annual inflation on the PCE price index.[3]

    How it sets rates

    The Fed’s main tool is its target for the federal funds rate, the rate banks pay to borrow reserves from each other overnight.[11] It steers that rate mainly by changing the interest it pays on the reserve balances banks hold at the Fed.[12] Rate changes pass quickly into short-term borrowing costs. They also shape longer-term rates through expectations about where policy is heading.[13][14] The explainer on rate hikes and cuts covers this in more detail.

    Policy in 2025 and 2026

    The Fed cut rates by a total of 0.75 percentage point between September and December 2025, ending at a 3.50-3.75% range.[15] It held that range through July 2026.[16][17]

    On September 16, 2026 the FOMC voted unanimously to raise the range to 3.75-4.00%.[5] It was the Fed’s first increase since July 2023.[18] Inflation was 3.4% on the PCE measure in the year to August.[19] Policymakers cited higher oil and fuel prices and AI-related investment as sources of inflation pressure.[20]

    Every decision of 2026 is listed in the rate decisions tracker. Most officials expected another increase by the end of 2026.[21] The argument over what comes next is in the rate-path debate.

    Communication under Warsh

    Since the June 2026 meeting, the first after Warsh took office, FOMC statements have ended with the line “The Committee will deliver price stability.”[22] At Jackson Hole in August, Warsh said regular forward guidance had “overstayed its welcome” and should be limited in normal times.[23] He also said markets should not look mainly to the Fed for their next trade.[24]

    Questions readers ask

    What is the Federal Reserve?

    The central bank of the United States, created by the Federal Reserve Act of 1913. It consists of the Board of Governors in Washington, D.C., and 12 regional Federal Reserve Banks.[1]

    What is the Fed's dual mandate?

    The Federal Reserve Act tells the Fed to promote maximum employment, stable prices and moderate long-term interest rates. This is commonly called the dual mandate.[2]

    What inflation rate does the Fed target?

    2% a year, measured by the annual change in the price index for personal consumption expenditures (PCE).[3]

    Who is the Fed chair in 2026?

    Kevin Warsh took office as Chairman on May 22, 2026, for a four-year term ending May 21, 2030.[4]

    What is the Fed's interest rate now?

    After the September 16, 2026 decision, the target range for the federal funds rate is 3.75% to 4.00%.[5]

    Sources

    Each numbered claim is a statement we checked against the sources listed with it. Status shows how well established it is.

    1. [1]

      The Federal Reserve is the US central bank, created by the Federal Reserve Act of 1913, and consists of the Board of Governors in Washington and 12 regional Federal Reserve Banks. confirmedas of 2026-10-10

    2. [2]

      The Federal Reserve Act directs the Fed to promote maximum employment, stable prices and moderate long-term interest rates, a mandate commonly called the dual mandate. confirmedas of 2026-10-10

    3. [3]

      The FOMC judges that 2% annual inflation, measured by the PCE price index, is most consistent with its mandate. confirmedas of 2026-10-10

    4. [4]

      Kevin Warsh took office as Fed Chairman on May 22, 2026 for a four-year term ending May 21, 2030, and also chairs the FOMC; he was previously a governor from 2006 to 2011. confirmedas of 2026-10-10

    5. [5]

      On September 16, 2026 the FOMC unanimously raised the federal funds target range by a quarter point to 3.75-4.00%, saying the move would support a timelier return to 2% inflation. confirmedas of 2026-09-16

    6. [6]

      The Fed says changes in interest rates tend to affect stock prices by changing how attractive equities are relative to other investments, and also move house prices and the dollar. confirmedas of 2026-10-10

    7. [7]

      The seven Fed governors are nominated by the President and confirmed by the Senate for 14-year terms; the Chair and Vice Chairs serve four-year terms in those roles. confirmedas of 2026-10-10

      • Board Members · Board of Governors of the Federal Reserve System (retrieved 2026-10-10)
      • Board Members · Board of Governors of the Federal Reserve System (retrieved 2026-10-10)
    8. [8]

      As of October 2026 the Board of Governors comprised Chairman Kevin Warsh, Vice Chair Philip Jefferson, Vice Chair for Supervision Michelle Bowman, and Governors Michael Barr, Lisa Cook, Jerome Powell and Christopher Waller. confirmedas of 2026-10-10

      • Board Members · Board of Governors of the Federal Reserve System (retrieved 2026-10-10)
    9. [9]

      The FOMC has 12 voting members, the seven governors, the New York Fed president and four of the other 11 Reserve Bank presidents on one-year rotating terms; all presidents take part in discussions. confirmedas of 2026-10-10

    10. [10]

      The Fed conducts monetary policy, promotes financial stability, supervises and regulates financial institutions, oversees payment systems, and promotes consumer protection and community development. confirmedas of 2026-10-10

    11. [11]

      The federal funds rate is the rate banks pay to borrow reserve balances overnight, and changing its target is the FOMC's primary policy tool; the target has been set as a 25-basis-point range since December 2008. confirmedas of 2026-10-10

    12. [12]

      The Fed steers the federal funds rate mainly by changing the interest rate it pays on banks' reserve balances. confirmedas of 2026-10-10

    13. [13]

      Changes in the federal funds rate quickly pass through to short-term borrowing costs, including Treasury bills, commercial paper, floating-rate mortgages and many credit lines. confirmedas of 2026-10-10

    14. [14]

      Longer-term rates such as those on mortgages depend on expectations for the path of policy and the economy, not just the current federal funds rate, so Fed communications also move them. confirmedas of 2026-10-10

    15. [15]

      The Fed cut rates by a total of 75 basis points over three meetings from September to December 2025, ending at a 3.50-3.75% target range. confirmedas of 2025-12-10

    16. [16]

      On January 28, 2026 the FOMC held the target range at 3.50-3.75% by a 10-2 vote; Stephen Miran and Christopher Waller preferred a quarter-point cut. confirmedas of 2026-01-28

    17. [17]

      On July 29, 2026 the FOMC held rates at 3.50-3.75% by a 9-3 vote; Hammack, Kashkari and Logan preferred a quarter-point increase. confirmedas of 2026-07-29

    18. [18]

      Before September 2026, the Fed's most recent rate increase was in July 2023, when it raised the target range to 5.25-5.5%. confirmedas of 2026-10-06

    19. [19]

      The PCE price index, the Fed's preferred inflation gauge, rose 3.4% in the year to August 2026; excluding food and energy it rose 3.0%. confirmedas of 2026-09-30

    20. [20]

      FOMC participants cited higher crude oil and fuel prices from geopolitical developments and surging AI-related investment as sources of inflation pressure in September 2026. confirmedas of 2026-10-07

    21. [21]

      The September 2026 minutes said most participants judged another rate increase would likely be appropriate by year-end, while stressing that decisions depend on incoming data. confirmedas of 2026-10-07

    22. [22]

      On June 17, 2026, at the first FOMC meeting after Kevin Warsh became Chairman, the Committee held rates at 3.50-3.75% by a 12-0 vote; its statement ended "The Committee will deliver price stability." confirmedas of 2026-06-17

    23. [23]

      In his August 2026 Jackson Hole speech, Chairman Warsh said regular forward guidance had "overstayed its welcome" and should be limited in normal times. confirmedas of 2026-08-28

    24. [24]

      Warsh said the Fed needs clear market signals and that markets should not look primarily to the Fed for their next trade. confirmedas of 2026-08-28

    Revision history (1)
    1. Page created.

    Created Oct 10, 2026. Last reviewed by an editor on Oct 10, 2026. Next scheduled review: Nov 10, 2026.

    Cite this page

    "Federal Reserve." ContentLora, updated Oct 10, 2026. https://contentlora.com/wiki/federal-reserve

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