The Fed

The Federal Reserve System, a network of twelve Federal Reserve Banks and affiliated branches that serves as the central bank of the United States. "The Fed" also often refers to the Board of Governors of the Federal Reserve System. The Fed Board sets overnight lending rates for banks. This is what banks charge each other for borrowing money overnight, which they do when they need to replenish their reserves. The Fed uses these rates to control inflation: if it lowers these rates, more money flows in the form of loans to consumers and businesses; if it raises rates, there are fewer loans. Mortgage rates are not tied to the Fed's rates, but they are influenced by it.