The Federal Reserve is the central bank of the United States, responsible for executing monetary policy since 1913. The Federal Reserve is quasi-independent: while the chair and other senior leaders at the Fed are appointed by the President and confirmed by the Senate, the leaders do not directly report to the President like branches of departments like the Department of Defense. The Federal Reserve currently holds a dual mandate: to keep inflation stable and maximize employment. They have also taken over partial responsibility for financial stability.
The Federal Reserve (“the Fed”) has historically maintained a 2% inflation target. In 2020, Federal Reserve chairman Jerome Powell announced a new policy called “Flexible Average Inflation Targeting”, meaning that the Fed would target an “average” inflation rate of 2%. If they undershoot one year, they will overshoot 2% the next year to get an average of 2% (and vice versa).
To learn more about how the Federal Reserve can affect key monetary variables, see the section on Monetary Policy