The Structure of the Federal Reserve System
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The Federal Open Market Committee |
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The Federal Open Market Committee (FOMC) is the most important monetary policymaking body of the Federal Reserve System. It is responsible for formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. The FOMC makes key decisions regarding the conduct of open market operationspurchases and sales of U.S. government and federal agency securitieswhich affect the provision of reserves to depository institutions and, in turn, the cost and availability of money and credit in the U.S. economy. The FOMC also directs System operations in foreign currencies. |
Membership Organization Meetings Attendance at meetings is restricted because of the confidential nature of the information discussed and is limited to Committee members, nonmember Reserve Bank presidents, staff officers, the Manager of the System Open Market Account, and a small number of Board and Reserve Bank staff. The Decisionmaking Process After these reports, the Committee members and other Reserve Bank presidents turn to policy. Typically, each participant expresses his or her own views on the state of the economy and prospects for the future and on the appropriate direction for monetary policy. Then each makes a more explicit recommendation on policy for the coming intermeeting period (and for the longer run, if under consideration). Finally, the Committee must reach a consensus regarding the appropriate course for policy, which is incorporated in a directive to the Federal Reserve Bank of New Yorkthe Bank that executes transactions for the System Open Market Account. The directive is cast in terms designed to provide guidance to the Manager in the conduct of day-to-day open market operations. The directive sets forth the Committee's objectives for long-run growth of certain key monetary and credit aggregates. It also sets forth operating guidelines for the degree of ease or restraint to be sought in reserve conditions and expectations with regard to short-term rates of growth in the monetary aggregates. Policy is implemented with emphasis on supplying reserves in a manner consistent with these objectives and with the nation's broader economic objectives. Effects of Policy Open market operations as directed by the FOMC are the major tool used to influence the total amount of money and credit available in the economy. The Federal Reserve attempts to provide enough reserves to encourage expansion of money and credit in keeping with the goals of price stability and sustainable growth in economic activity. Reports Twice a year the Board submits a written report to Congress on the state of the economy and the course of monetary policy, and the Chairman is called on to testify on this report. |
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The Structure of the Federal Reserve System
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