Before each regularly scheduled meeting of the FOMC, System staff prepare written reports on past and prospective economic and financial developments that are sent to Committee members and to nonmember Reserve Bank presidents. Reports prepared by the Manager of the System Open Market Account on operations in the domestic open market and in foreign currencies since the last regular meeting are also distributed. At the meeting itself, staff officers present oral reports on the current and prospective business situation, on conditions in financial markets, and on international financial developments. In its discussions, the Committee considers factors such as trends in prices and wages, employment and production, consumer income and spending, residential and commercial construction, business investment and inventories, foreign exchange markets, interest rates, money and credit aggregates, and fiscal policy. The Manager of the System Open Market Account also reports on account transactions since the previous meeting.
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).
Consensus
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 York—the 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
Stance on inflation
These policy makers tend to be divided in two camps: inflation doves and hawks. Inflation doves tend to be equally concerned with economic growth and with keeping inflation moderate. Their critics believe they are more concerned with GDP growth than containing inflation. Therefore, doves are inclined to cut interest rates and favor ending interest rate hike cycles earlier than hawks. Notable doves are Alan Blinder and Janet Yellen.
Inflation hawks tend to be more concerned with taming inflation. Their critics believe they are not as concerned with the second half of the dual Congressional mandate, which is to promote economic growth. Federal Reserve Chairs seem to prefer to be considered hawks because the bond market treats hawks with more credibility, and accords them more flexibility. Former Fed Chairman Alan Greenspan had a sterling reputation which allowed him to leave interest rates low (Dovish policy) without igniting inflationary fears. Current Fed Chairman Ben Bernanke attempted to establish a reputation as a vigilant hawk, but the easing in 2007-2008 in response to the credit and US housing crises leaves him much more dovish than his European contemporary, Jean-Claude Trichet. In any case, such a reputation can only be earned over an extended term. Notable hawks have been Paul Volcker and William Poole.
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).
Consensus
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 York—the 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
Stance on inflation
These policy makers tend to be divided in two camps: inflation doves and hawks. Inflation doves tend to be equally concerned with economic growth and with keeping inflation moderate. Their critics believe they are more concerned with GDP growth than containing inflation. Therefore, doves are inclined to cut interest rates and favor ending interest rate hike cycles earlier than hawks. Notable doves are Alan Blinder and Janet Yellen.
Inflation hawks tend to be more concerned with taming inflation. Their critics believe they are not as concerned with the second half of the dual Congressional mandate, which is to promote economic growth. Federal Reserve Chairs seem to prefer to be considered hawks because the bond market treats hawks with more credibility, and accords them more flexibility. Former Fed Chairman Alan Greenspan had a sterling reputation which allowed him to leave interest rates low (Dovish policy) without igniting inflationary fears. Current Fed Chairman Ben Bernanke attempted to establish a reputation as a vigilant hawk, but the easing in 2007-2008 in response to the credit and US housing crises leaves him much more dovish than his European contemporary, Jean-Claude Trichet. In any case, such a reputation can only be earned over an extended term. Notable hawks have been Paul Volcker and William Poole.
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