Answer: Monetary Policy
Step-by-step explanation:
The Fed controls inflation through monetary policy whereby it either increases the supply of money in the economy or it decreases it. The logic being that when there is more money in the economy, people will be able to buy more goods and services which would lead to a rise in prices as demand pulls up inflation rates.
The reverse holds true.
The Fed uses tools such as Open market operations and adjusting the reserve requirement to accomplish monetary policy.
If the goal is to increase money supply, the Fed embarks on Open market operations where it buys securities(paying the public puts money into the economy) from the public as well as reducing the reserve requirement which increases the amounts that banks can loan out.
To reduce money supply the Fed sells securities and increases the reserve requirement. There are other tools for monetary police but the basic premise is the same; they are used to either increase or decrease money supply.