The Committee

The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal. With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability. Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Jack Guynn; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern. In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 3-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.

This FOMC statement is from February 2005. We have deliberately chosen a statement from a few years ago because we want to begin with monetary policy prior to the economic crisis that began in 2008. This policy statement contains all the essential elements of monetary policy in normal times. The 12 people listed in the second-to-last paragraph of this announcement were the FOMC members in February 2005. (These names are different from those we named at the start of the chapter because the composition of the FOMC changes over time.) The president of the United States was not one of them. And none of them are members of Congress. You did not vote for any of them. None of the three main branches of the US government (executive, legislative, or judicial) is involved in the setting of US monetary policy. The FOMC is part of a government body called the US Federal Reserve Bank, commonly known as the Fed. The Fed is independent: decisions made by the Fed do not have to be approved by other branches of the government.