You hear it in the news all the time: interest rates are changing. What is the deal with interest rates? What purpose does all of this serve?
The Chairman of the Federal Reserve keeps an eye on the economy, specifically on how hot or cold it happens to be running at a given point.
The Fed's job is to basically put money into the economy or take it out, pure and simple.
Taking money out
If the economy has too much money chasing too few goods, that is inflation and the Fed will removes money from the system by raising interest rates. This is accomplished by buying bank bonds.
Putting money in
If the economy needs a shot in the arm to get going, the Fed put more money into the economy. This is primarily accomplished by lowering interest rates which puts more money back into the economy (The Fed sells bonds back to the banks).
The Fed also can order more money printed up but that is much rarer.