Explain the duties of central banks. How do central banks, such as the Federal Reserve, implement national monetary policies?

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As the official national bank of each country, the central bank regulates the money supply and credit, issues currency, and manages the rate of exchange. The central bank also seeks to ensure the safety and soundness of the national financial system by supervising and regulating the nation's banking system.
A key goal is to keep price inflation low. The central bank regulates the nation's money supply and credit by 1. buying and selling money in the banking system, 2. increasing or decreasing the interest rates on funds loaned to commercial banks, or 3. buying and selling government securities. Many central banks also buy and sell government securities to finance government programs and activities.
Monetary intervention describes how central banks manipulate currency rates, usually with the aim of maintaining stable or orderly exchange rates. Such intervention is achieved by buying or selling currencies in the foreign exchange market. For example, if the central bank of the United States (called the Federal Reserve Bank) wants to support the value of the U.S. dollar, it might buy dollars in the foreign exchange market. By so doing, the supply of dollars is reduced, which increases the value of dollars still in circulation.