President’s Message: Understanding the roles and responsibilities of the Board of Governors and the FOMC
One of the most closely watched responsibilities that Congress has assigned the Federal Reserve is to administer monetary policy that supports both stable prices and maximum employment. Within the Fed System, this responsibility rests with a body known as the Federal Open Market Committee (FOMC).
The Federal Reserve System’s design reflects congressional concern about a central bank operating under the exclusive control of either the government or the private sector. As a result, Congress chose a blended structure, combining elements of both. Although parts of the Fed share some characteristics with private-sector entities, the Federal Reserve was established to serve the public interest.
The Fed’s Board of Governors is an independent agency of the federal government, while the 12 regional Federal Reserve Banks are separately incorporated, each with a board of directors composed of three Board of Governors appointees, three nonbankers and three bankers.
The FOMC consists of 12 voting members— the members of the Board of Governors; the president of the New York Fed; and four of the remaining 11 Reserve Bank presidents, who serve one-year terms on a rotating basis. All of the Reserve Bank presidents attend every FOMC participate in FOMC discussions.
As president of the Kansas City Fed, I vote on a three-year rotation with the presidents of the Minneapolis and San Francisco Feds. Mary Daly, president of the San Francisco Fed, completed a term as an FOMC voter in 2018, while I will vote this year. In 2020, Minneapolis Fed President Neel Kashkari will serve as a voter.
My views on monetary policy are informed in several ways. Within the Kansas City Fed, a small group of economists engages in research and analysis on the macro and regional economies and develops economic forecasts. Also, bank staff members provide perspectives on issues related to community development, as well as financial and payments system dynamics. And discussions with business, community, banking and labor leaders across the region I serve bring relevant insight on current and emerging conditions.
My responsibility on the FOMC is to represent the region served by the Kansas City Fed and provide input on policy choices that best achieve price stability and maximum employment for the U.S. economy. It’s a role that was purposefully built into the central bank’s decentralized design, aiming to ensure broad representation on behalf of the American public.