Glossary
Definition
Federal Reserve
The central bank of the United States.
The Federal Reserve (the Fed) is the central banking system of the United States, established in 1913. It sets monetary policy, including the federal funds rate — the benchmark interest rate that influences borrowing costs across the economy. The Fed's decisions on interest rates are among the most closely watched events in global finance.
Frequently Asked Questions
How does the Fed affect stock prices?
When the Fed raises rates, borrowing becomes more expensive, company profits may decline, and future earnings are discounted more heavily — typically causing stock prices to fall. When rates fall, the reverse often occurs.