Influence the conduct of monetary policy through their administration of the discount facilities at each bank and by having five of their presidents sit on the FOMC, the main policymaking arm of the FED.
The Fed has traditionally used three tools to conduct monetary policy: reserve requirements, the discount rate, and open market operations.
The Federal Reserve conducts the nation's monetary policy by managing the level of short-term interest rates and influencing the availability and cost of credit in the economy.
Monetary policy directly affects interest rates; it indirectly affects stock prices, wealth, and currency exchange rates.
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