How the Fed Guides Monetary Policy: Myths and Facts

A Little More About the FOMC

The Federal Open Market Committee (FOMC) has increasingly become a household word as the media reports its activities, but few people know much about the committee itself.

The FOMC has 12 voting members--the seven members of the Board of Governors and five Reserve Bank presidents. The Chairman of the Board of Governors serves as the permanent Chairman of the FOMC. The president of the Federal Reserve Bank of New York serves as the permanent Vice Chairman of the FOMC and is, therefore, always a voting member. The 11 other presidents serve one-year terms on a rotating basis. While all 12 Reserve Bank presidents participate in every FOMC meeting, only those serving as FOMC members may vote.

The FOMC meets eight times a year in Washington, D.C. For each session, economists at the Board of Governors and the Reserve Banks prepare extensive economic analysis of statistics from every region and industry in the country.

The FOMC also gets valuable grassroots information from the boards of directors of the Reserve Banks. For each meeting, Reserve Bank presidents bring reports on their Districts' economies, based on information from Reserve Bank directors, other District residents, and the Banks' Research departments. These reports are part of the briefing materials used by the FOMC in formulating monetary policy.

Twice a year, the Chairman of the Board of Governors reports to Congress on the FOMC's economic views and projections, as well as the issues likely to affect near-term monetary policy decisions. The long-term goals of the Fed remain constant: a strong economy with stable prices, maximum sustainable employment, and ample opportunity for sound economic growth.

How the Fed Guides Monetary Policy: Myths and Facts