Federal Open Market Committee
It is the twelve-member FOMC, as the primary vehicle of United States national monetary policy, that decides on key issues relating to interest rates, and the growth of the country’s money supply. The twelve members of the FOMC consist of the seven members of the Federal Reserve System Board of Governors, along with the Federal Reserve Bank of New York’s President. The remaining four members are the Presidents of the other eleven Reserve Banks, who serve on a rotational basis for the period of one year at a time.
When formed by the Banking Act of 1933, the FOMC did not allow the Board of Governors voting rights. However this was revised in 1935 and again in 1942 resulting in the current structure of the committee with its twelve voting members. The President of the Federal Reserve Bank of New York remains as a permanent member of the Federal Open Market Committee. The other eleven Federal Banks in the United States are: Philadelphia, Boston, Richmond, Chicago, Cleveland, Dallas, Atlanta, St Louis, Minneapolis, San Francisco and Kansas City. While only four Federal Bank Presidents have voting rights at any given time, all eleven Presidents will attend FOMC meetings to add their opinions and insights to matter on the meeting agenda.
US Law requires that the FOMC meet a minimum of four times a year, with meetings held in Washington DC. However, since 1981 the FOMC has been meeting at intervals of between five and eight weeks, with eight scheduled meetings held each year. Moreover, should circumstances warrant it, discussions take place via telephone conference, or members may be called upon to vote on a proposed action by proxy.
In making decisions and implementing policy, the members of the FOMC must reach a consensus, which is incorporated in a directive to the bank executing transactions for the System Open Market Account – the Federal Reserve Bank of New York. At least twice a year, the Chairman of the Board of Governors of the Federal Reserve System is required to appear before Congressional hearings to present a report on the activities and objectives of the Federal Open Market Committee in carrying out its commission.