bain_y_howells__monetary_economics__policy_and_its_theoretical_basis

MONETARY POLICY IN THE USA 433
Congress. The February report provides a comprehensive review of the
economic and financial situation in the country and reviews a wide range of
indicators relevant to monetary policy. It also includes specific annual
growth ranges for money and debt aggregates, consistent with expectations
for inflation and growth of employment and output. In July, the Chairman
reports any revisions to the plans for the current year, along with preliminary
plans for the following year. Questioning by Congress committees can
be detailed and tough. The reports are published by the Fed.
The meetings of the FOMC are also quite open. Although there are only
twelve voting members, attendance at the meetings is much wider. The
seven presidents of the regional reserve banks who are not currently voting
members of the FOMC attend and are allowed to speak. At the October
2001 meeting, another 35 people were present, including the Manager of the
New York Fed’s Open Market System, and economists and associate economists
of the various divisions of the Office of the Board of Governors, several
of whom provided reports to the Committee on the present state of the
economy and the financial markets. The decisions of the FOMC meetings
are published immediately after the meeting.
At its December 1998 meeting, the FOMC decided also to announce
immediately major shifts in its view about prospective developments relevant
to the likelihood of a future increase or decrease in the targeted Federal
funds rate. The aim was to communicate to the public more quickly the
FOMC’s assessment of the balance of risks and its policy leanings. The Fed
became worried, however, about the impact that these statements were having
on the markets and now releases a statement after each meeting, whether
or not it feels that there have been changes affecting future developments.
These statements choose among a set of standard phrases to express the
Committee’s view. Thus, throughout 2001, all post-meeting statements
concluded with the phrase that, in the view of the Committee, ‘the risks are
weighted mainly toward conditions that may generate economic weakness
in the foreseeable future’. Minutes of FOMC meetings are published a few
days after the following FOMC meeting and full transcripts become available
five years later. Minutes include voting records, although these are
often not very useful. This is because the FOMC attempts to reach consensus
before motions are put to the vote and so, when the vote is taken, there
is frequently no dissenting voice. No votes were recorded against decisions
through the whole of 2001.
It follows from this, that the Fed’s monetary policy is fairly transparent
and its reasoning well understood. The views of the people, on whose
behalf the FOMC is meant to be acting, can be expressed through elected