The Federal Reserve plays a critical role in U.S. economic policy by regulating monetary policy and maintaining economic stability. It sets interest rates, controls money supply, and serves as a bank for the government. Through tools like open market operations and reserve requirements, the Federal Reserve influences inflation and employment levels. This central bank also acts as a stabilizing force during economic crises, implementing measures to prevent or mitigate downturns. Its decisions can significantly impact the broader economy, affecting everything from consumer spending to global financial markets.