As long as the U.S. economy is growing
steadily and inflation is low, few people givemuch thought to the Federal Open MarketCommittee, or FOMC, the group within the FederalReserve System charged with setting monetary policy.Yet, when economic volatility makes the eveningnews, this Committee and its activities become mucmore prominent. Investors and workers, shoppersand savers all pay more attention to the FOMC’sdecisions and the wording of its announcements atthe end of each meeting.Why? Because the decisions made by the FOMC havea ripple effect throughout the economy. The FOMCis a key part of the Federal Reserve System, whichserves as the central bank of the United States. Amongthe Fed’s duties are managing the growth of themoney supply, providing liquidity in times of crisis,and ensuring the integrity of the financial system. TheFOMC’s decisions to change the growth of the nation’smoney supply affect the availability of credit and thelevel of interest rates that businesses and consumerspay. Those changes in money supply and interestrates, in turn, influence the nation’s economic growthand employment in the short run and the generallevel of prices in the long run.As a result, many people have good reason to wonderabout who makes these decisions about monetarypolicy and how they make them. In these pages, wewill eliminate some of the mystery surrounding whatgoes on at the FOMC meetings in Washington, D.C.
The Mechanics of a MeetingLet’s take a closer look at how our nation’s monetarypolicymakers go about their task in a typical FOMCmeeting. Or, put simply, let’s spend a day in the life ofthe FOMC.The FOMC meets regularly — typically every sixto eight weeks — in Washington, D.C., althoughthe Committee can and does meet more often by4 A Day in the Life of the FOMC A Day in the Life of the FOMC 5responsible for keeping the federal funds rate closeto the target level set by the FOMC. The managerexplains how well the Open Market Trading Deskhas done in hitting the target level since the lastFOMC meeting and discusses recent developmentsin the financial and foreign exchange markets.
Up next is the Federal Reserve Board’s director ofthe Division of Research and Statistics, along withthe director of the Division of International Finance.#p#分頁標題#e#
They review the Board staff’s outlook for the U.S.economy and foreign economies. This detailedforecast is circulated the week before the meeting toFOMC members in what is called the “Greenbook”— named for its green cover in the days when it wasa printed document.Then the meetingprogresses to the firstof two “go-rounds,”which are the coreof FOMC meetings.
During the first goround,all of the FedGovernors and ReserveBank presidentsdiscuss how they see economic and financialconditions. The Reserve Bank presidents speakabout conditions in their Districts, as well as offeringtheir views on national economic conditions.
The data and information discussed vary by regionand therefore spotlight a wide range of industries.Above: Modern-day meeting of the Federal Open Market Committee at the Eccles Building,Washington, D.C.
phone or videoconference if needed. The meetingsare generally one-day or two-day events, with thetwo-day meetings providing more time to discuss
a special topic. A typical one-day meeting beginson Tuesday at 8:30 a.m. and ends between 1:00and 2:00 p.m. Two-day meetings usually begin on
the afternoon of the first day, typically a Tuesdayafternoon, and end between noon and 2:00 p.m. on
the second day.
Around the table in the Federal Reserve Board’sheadquarters sit all 19 FOMC participants (sevenGovernors and 12 Reserve Bank presidents) aswellas select staff and economists from the Boardand the Reserve Banks. Because of the nature ofthe discussions, attendance is restricted. A ReserveBank president, for instance, typically brings alongSome Facts About the Fed
The Federal Reserve System — commonly called“the Fed” — serves as the central bank of the UnitedStates. Congress passed the Federal Reserve Act in1913, which President Woodrow Wilson supportedand signed into law on December 23, 1913. Congressstructured the Fed as a distinctly American versionof a central bank: a “decentralized” central bank,only one staff member, usually his or her director ofresearch.

The objective at each meeting is to set theCommittee’s target for the federal funds rate —the interest rate at which banks lend to each otherovernight — at a level that will support the two keyobjectives of U.S. monetary policy: price stabilityand maximum sustainable economic growth. Themeeting’s agenda follows a structured and logicalprocess that results in well-informed and thoroughlydeliberated decisions on the future course ofmonetary policy.
The meeting begins with a report from the managerof the System Open Market Account (SOMA) atthe Federal Reserve Bank of New York, who iswith Reserve Banks and Branches in 12 Districtsspread across the country and coordinated by a Boardof Governors in Washington, D.C. Congress alsogave the Fed System a mixture of public and privatecharacteristics. The 12 Reserve Banks share manyfeatures with private-sector corporations, includingboards of directors and stockholders (the member#p#分頁標題#e#
banks within their Districts). TheBoard of Governors, though, is anindependent government agency,with oversight responsibilities forthe Reserve Banks.
The Fed conducts monetarypolicy, supervises and regulatesbanking, serves as lender of lastresort, maintains an effective andefficient payments system, andserves as banker for banks and theU.S. government. Conducting the
nation’s monetary policy is one ofthe most important — and oftenthe most visible — functions ofthe Fed.
President Wilson signing the Federal Reserve Act, 19136
A Day in the Life of the FOMC A Day in the Life of the FOMC 7So Who Votes?
In the early days of the FOMC, controversy swirled around how to structure the vote. Should monetary policybe set by the 12 Reserve Banks or theBoard of Governors? Or both? In 1935 Congress decided that the sevenGovernors would vote along with only five of the 12 presidents. Thepresident of the New York Fed always votes —since the Open Market Trading Desk operates in that District — along with four presidents who rotate from amongthe groups shown below. In that way, voting members always come from different parts of the country.One-year voting terms begin with the first scheduled meeting in January, at whichtime the Committee formally elects its officers. Traditionally, the Chairman of theBoard of Governors chairs the FOMC, and the New York Fed president serves as vicechairman. Despite the voting design, all 19 policymakers participate equally in theanalysis and deliberations. Giving each president a seat at the FOMC table ensuresthat a “decentralized” central bank sets monetary policy that reflects regional as wellas national economic conditions.
The outlook options could include no change, anincrease, or a decrease in the federal funds rate target.Each option is described, along with a clear rationale,the pros and cons, and some alternatives for howthe Committee could explain its decision in a publicstatement to be released that afternoon.Then, there is a second go-round. The Reserve Bankpresidents and Governors each make the best casefor the policy alternative they prefer, given currenteconomic conditions and their personal outlook forthe economy. They also comment on how they thinkthe statement explaining the decision should beworded.One of the most important aspects of an FOMCmeeting is that all voices matter. The analysis and
viewpoints of each committee participant — whethera voting member or not — play an instrumental rolein the FOMC’s policy decisions.
At the end of this policy go-round, the Chairmansummarizes a proposal for action based on the
Committee’s discussion, as well as a proposedstatement to explain the policy decision. The FedGovernors and presidents then get a chance toquestion or comment on the Chairman’s proposedapproach. Once a motion for a decision is on the table,the Committee tries to come to a consensus throughits deliberations. Although the final decision is mostoften one that all can support, there are times whensome differences of opinion may remain, and votingmembers may dissent.#p#分頁標題#e#
The process brings a valuable diversity of views tomonetary policy decisions. The Committee’s ability to
For example, one would expect the review ofregional conditions in the San Francisco District tolend insight into the tech sector of Silicon Valley. TheChicago District covers a region heavily dependenton manufacturing and automobiles. Philadelphia’sDistrict has become much more diverse andrepresentative of the national economy, so it tends toreflect what is happening across a variety of sectors.
The policymakers have prepared for this go-roundthrough weeks of information gathering. Beforethe FOMC meeting, each Reserve Bank prepares a“Summary of Commentary on Current EconomicConditions,” which is published two weeks beforeeach meeting in what most people call the “BeigeBook,” for the color of its cover when originallyprinted. One Federal Reserve Bank, designated ona rotating basis, publishes the overall summary ofthe 12 District reports. The Reserve Bank presidentshave also gathered information by talking withexecutives in a variety of business sectors andthrough meetings with the Banks’ boards ofdirectors and advisory councils. In addition,all Committee participants receive briefings oneconomic conditions by their Research Departmentstaffs in the days leading up to the FOMC meeting.
The briefings cover regional, national, andinternational business and financial conditions.
This first go-round covers valuable information abouteconomic activity throughout the country, measuredin hard data and recent anecdotalas the analysis and interpretation conveyed by thepolicymakers sitting around the table. This is a keyway in which each region of the U.S. has input intothe making of national monetary policy. This portionof the meeting concludes with the FOMC Chairmansummarizing the discussion and providing theChairman’s own view of the economy.At this point, the policy discussion begins with theFederal Reserve Board’s director of the Division of
Monetary Affairs, who outlines the Committee’svarious policy options. The policymakers receive
these options usually by the Friday before themeeting in the “Bluebook,” again named for itscover’s color when originally printed.A Bit of Background: Monetary PolicySo, what is monetary policy? Simply put, it refers tothe actions taken by the Fed to influence the supply ofmoney and credit in order to foster price stability andmaintain maximum sustainable economic growth,which are the key objectives established by Congressfor monetary policymakers in the U.S. The FederalReserve issues the nation’s currency (Federal Reservenotes) and manages the amount of funds the bankingsystem holds as reserves. Currency and reservesmake up what is called the monetary base.The Fed’s instrument for implementing monetarypolicy is the FOMC’s target for the federal funds rate— the interest rate at which banks lend to each otherovernight. By buying andselling U.S. governmentsecurities in the open market,the Fed influences the interestrate that banks charge eachother. Movements in thisrate and expectationsabout those changesinfluence all otherinterest rates andasset prices in theeconomy.#p#分頁標題#e#
Always Votes Rotating Vote (1 president from each group)
Chairman of the Board
(Chair of FOMC)
+ Six Governors
President of the NY Fed
(Vice Chair of FOMC)
Group 1 Group 2 Group 3 Group 4
Boston Chicago Atlanta Kansas City
Philadelphia Cleveland Dallas MinneapolisRichmond St. Louis San Francisco8 A Day in the Life of the FOMCand the supposed reasoning behind the decision.
However, without clear communications, policydecisions became a source of speculation.
In recent years, the FOMC has sought to improvetransparency about its policymaking. Today, the centralbank is quite explicit in setting out the objectives ofpolicy and its views on the outlook for the economy.Here are some significant milestones:
77 78 80 85 90 91 92 93 95 96 97 98 99 01 03 05 06 08
The FOMC begins torelease a statementdisclosing changesin the federal fundsrate target.
The FOMCbegins releasinga statement afterevery meeting andstarts to includean assessment ofthe balance of risksto achieving itsobjectives.
The results of theFOMC roll-callvote are added tothe post-meetingstatement.
The FOMC speedsup the release ofits minutes: Now
there is only a threeweeklag, instead ofwaiting until afterthe next regularlyscheduled meeting,
which meant a lagof about six weeks.
The FOMCdecides to releaseits economic
projections fourtimes a year.
1994 2000 2002 2004 2007with meeting minutes reflecting an ever-changing mix ofpossible factors influencing the Committee’s decisionsabout its fed funds rate target, ranging from indicatorsof economic growth to commodity prices to exchangerates.
Despite the lack of transparency, the financial pressreported extensively before each regularly scheduledFOMC meeting on the likely decision of policymakersmake thoughtful and sound policy choicesis strengthened by the interaction ofpolicymakers with different perspectivesand varied experiences. As Americanwriter and journalist Walter Lippmannonce said, “Where all men think alike, no
one thinks very much.” The give and takeat FOMC meetings reflects the remarkablydeliberative and thoughtful nature ofpolicymaking and makes the processmore constructive.
At the end of the policy discussion, allseven of the Fed Governors and the fivevoting Reserve Bank presidents cast aformal vote on the proposed decision andthe wording of the statement.FOMC Statements:Communicating Policy Actions
After the vote has been taken, the FOMCpublicly announces its policy decision at
2:15 p.m. The announcement includes thefederal funds rate target, the statementexplaining its actions, and the vote tally,including the names of the voters and thepreferred action of those who dissented.
In addition, the FOMC releases its officialminutes three weeks after each meeting.
The minutes include a more completeexplanation of the views expressed, whichallows the public to get a better sense of
the range of views within the FOMC andpromotes awareness and understandingof how monetary policy is made.#p#分頁標題#e#
In recent years, the FOMC has improvedcommunications with the public. Today,more than ever before, the Fed reportmore frequently and more thoroughly onthe economy.
The Federal Reservepresents testimonytwice each yearto Congress onthe conduct ofmonetary policy.The FOMC releasesthe first semiannualeconomic projections.The FederalReservepublishes thefirst “BeigeBook,” whichsummarizeseconomicconditions ineach Federal
Reserve District.
1975 1979 1983
Much has been said about the benefits of predictablepolicy and its role in shaping the public’s expectations.
However, just two decades ago, the central bank’sdecisions were at times hard to discern. The Fed saidrelatively little about its monetary policy and allowedctions to speak for themselves.However, markets — even those that are efficient — do not
like to be kept guessing. Fed-watchers complained thatFOMC decisions were made in an atmosphere of mystery,Timeline to Transparency
76 81 82 84 86 87 88 89
910 A Day in the Life of the FOMC A Day in the Life of the FOMC 11
What’s more, the FOMC now releases Committeeparticipants’ projections for the economy and
inflation four times a year, which provides addedinsight into the policymakers’ perspectives.Clearer guidance about the FOMC’s aims helpsthe economy run more smoothly. Individuals andbusinesses are able to make their own economicdecisions armed with a better understanding of whatthe central bank expects to happen in the economy.
This greater transparency also helps anchor thepublic’s expectations about the economy and thegeneral level of inflation by explaining the actionsthe central bank is pursuing.
Transparency also increases the central bank’saccountability to the public. In a democratic society,it is important that institutions with the delegatedauthority to act in the public interest be as clear andas transparent as possible about their actions. Failingto do so risks losing confidence and credibility— two essential ingredients for sound centralbank policymaking. When market participantsunderstand how the Fed will react to incomingeconomic information, policy is more effective.
Putting Policy in ActionOnce the FOMC establishes a target for the federalfunds rate, the Open Market Trading Desk at the
Federal Reserve Bank of New York conducts daily
open market operations — buying or selling U.S.government securities on the open market — asnecessary to achieve the federal funds rate target.Simply put, the Fed’s open market purchases of
government securities increase the amount ofreserve funds that banks have available to lend,which puts downward pressure on the federal
funds rate. Sales of government securities do just theopposite: They shrink the reserve funds available tolend and tend to raise the funds rate.Open market operations affect the amount of moneyand credit available in the banking system, therebyaffecting interest rates, which in turn affect thespending decisions of households and businessesand ultimately the overall performance of the U.S.economy.#p#分頁標題#e#
In ClosingSo that’s it — a day in the life of the FOMC. Wehope you have gained some insights into monetary
policymaking in our nation’s central bank. Nowthat you know more about how monetary policy
decisions are made, you should be able to betterunderstand news reports about FOMC meetings andthe Committee’s decisions.Since the FOMC’s beginnings, the U.S. economyand financial system have grown increasinglycomplex. In response, the FOMC has had to adapt
its policymaking so that it can continue to achieveits policy objectives of price stability and maximum
sustainable economic growth. In the future, sincewe can expect our economy and financial system tocontinue to change, it’s likely that the FOMC willcontinue to have to make adjustments as it seeks toachieve its monetary policy objectives.
A Brief History of the FOMCAlthough Congress created the Federal Reserve in1913, the history of Federal Reserve open marketoperations begins in the 1920s when Reserve Banksstarted looking for a new revenue source to covertheir operating costs. The Fed is fiscally independent
in that it receives no government appropriations. At
first, the Reserve Banks relied primarily on interestthey earned on loans to banks — called discountwindow loans. But over time, they also began topurchase government securities in the open marketwith the intention of earning interest income to covertheir expenses.
Soon Fed officials recognized that these open markettrades had a powerful and immediate impact onshort-term interest rates and the supply of moneyand credit. By the mid-1920s, the Federal ReserveBanks of New York, Boston, Philadelphia, Cleveland,and Chicago had set up a committee to coordinatetheir purchases and sales of securities. This groupwas called the Open Market Investment Committee.
The group was reorganized several times over the nextfew years, but this group involved only the ReserveBanks, not the Federal Reserve Board. Over time,open market operations were becoming the main toolfor carrying out monetary policy, overtaking anotherof the Fed’s monetary policy tools: changes in thediscount rate.
In the Banking Act of 1933, Congress established thename and legal structure of the FOMC as a formalcommittee of all 12 Reserve Banks. Then in 1935,Congress determined that the FOMC should 美國留學生金融學碩士dissertation定制includethe seven-member Board of Governors as well as the12 Reserve Bank presidents — bringing together bothcentralized and decentralized elements of the centralbank. In the 1935 act, Congress also decided that onlyfive of the 12 ReserveBank presidents would vote atany one time, along with the seven Governors.Fed Governors are appointed by the President ofthe Unitedapproval. The FOMC therefore reflects a blend ofnational and regional representation as well as bothpublic and private interests.PresidentRoosevelt signs the Banking Act of 1933Federal Reserve Board members, 1914#p#分頁標題#e#