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Generally speaking there are three main roles for the Federal Bank. That said, it is best to start with the their goal. The Fed's mandate is:
"to promote sustainable growth, high levels of employment, stability of prices to help preserve the purchasing power of the dollar and moderate long-term interest rates"
First, the Fed adjusts and sets interest rates to keep the economy growing. What the Fed wants is a moderate amount of inflation.
Second, the Fed oversees the banks to make sure that they are in line with regulatory principles. Compliance is a buzz word here.
Third, the Fed watches jobless rate to make sure that the United States has enough jobs.
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