What is the main function of the Federal Reserve?

The main function of the Federal Reserve, often simply referred to as "the Fed," is to regulate the monetary policy and oversee banks in the United States. This role is crucial for maintaining economic stability and managing inflation, unemployment, and interest rates. The Federal Reserve formulates policies that influence the availability and cost of money, which directly impacts lending practices, consumer spending, and overall economic growth.

By controlling the money supply and setting interest rates, the Fed can promote a healthy economy. For instance, if inflation rises too high, the Federal Reserve might increase interest rates to discourage borrowing and cool down spending, thus helping to stabilize prices. Conversely, in times of economic downturns, it may lower interest rates to stimulate borrowing and investment.

Other options do not encapsulate the core responsibilities of the Federal Reserve. It does not have direct authority over stock market prices; instead, market fluctuations are driven by a multitude of factors, including investor behavior and corporate earnings. The Federal Reserve also does not provide direct loans to individuals, as it primarily serves banks and financial institutions. Monitoring online financial transactions is outside its scope of duties, focusing instead on broader economic policies and regulations.