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Three bodies, three jobs

Three separate bodies share the work of setting monetary policy in the United States, and each one answers a different question. The Board of Governors, based in Washington, sets rules for banks and votes on some of the tools the system uses. The twelve regional Reserve Banks, each covering its own district, gather economic conditions from their part of the country and carry out the operations the system decides on. The Federal Open Market Committee (FOMC) is the group that actually sets the target range for the federal funds rate, the interest rate banks charge each other for overnight loans, and it draws its members from both of the other two bodies.

Why the split matters to a reader following a decision

A headline that says "the Fed raised rates" is really describing a vote taken by the FOMC, using authority that sits nowhere else in the system. The Board of Governors did not vote on that number, and the regional Reserve Banks did not either, though one of them, the New York Fed, is the one that carries the decision out in the market. Knowing which body did what makes it possible to find the actual document behind a decision.

The mechanics of who sits on the FOMC, who votes, and how the regional presidents rotate onto the Committee are worth tracing in their own right, since the answer changes the weight any single vote carries in a given year. The balance sheet the Federal Reserve holds is one of the tools this structure controls, and it is set through the same committee process.

Who sits on the FOMC, and who actually votes

The Federal Open Market Committee is not a fixed group of twelve people who all vote the same way every time. Some seats vote at every meeting, some seats vote only in certain years, and knowing which is which explains why the minutes list a different set of names from one meeting to the next.

  1. The governors hold a vote at every meeting

    The Board of Governors sit in Washington, and each governor who has been appointed by the President and confirmed by the Senate holds a vote on the Committee for as long as they serve their term. Their votes do not rotate: whoever holds a seat on the Board votes at every FOMC meeting held during that term.

  2. The New York Fed president votes every time too

    Of the twelve regional Reserve Bank presidents, the president of the Federal Reserve Bank of New York holds a standing vote on every decision the Committee makes. New York carries this permanent seat because its trading desk is the one that carries out the open market operations the Committee directs, so its president sits at the table for every vote.

  3. The other eleven regional presidents share the remaining seats

    The remaining eleven regional Reserve Bank presidents rotate through the other voting seats on the Committee, following a fixed order set out in the Committee's own rules. Every regional president attends every meeting and takes part in the discussion regardless of whether they hold a vote that year.

    In a voting year

    The president's vote on the target range and every other Committee action is recorded under their name in the published minutes.

    In a non-voting year

    The president still presents their own economic outlook and takes part in the discussion, but the minutes record no vote against their name that year.

  4. Checking who voted at a given meeting

    The Federal Reserve Board sets out the standing membership and that year's voting rotation ahead of each meeting cycle, and the minutes published after each meeting record exactly how each vote was cast. Reading the two together shows, for any single meeting, which governors, and which regional president, cast the votes behind a given decision.

A president who is not voting in a given year still speaks and is quoted in the minutes; only the recorded vote itself follows the rotation.

Which decisions belong to the Board, which to the FOMC, and which to the Reserve Banks?

Three different bodies inside the Federal Reserve hold three different kinds of authority, and a decision made by one is not a decision the others can make. Knowing which one is which tells you where to look when a policy move is announced, and which published record actually explains it.

What the Board of Governors decides

The Board of Governors sets the rate the Federal Reserve pays banks on the reserves they hold overnight, the mechanism that gives the whole system its floor. It also approves the discount rate proposed by each regional Reserve Bank's own board, and it writes the supervisory and regulatory rules the banking system operates under. These decisions are published on the Board's own site as formal rulings, with the date each one takes effect stated alongside it.

What the Federal Open Market Committee decides

The Federal Open Market Committee sets the target range for the federal funds rate, the number most people mean when they say "the Fed raised rates". It also directs what happens to the Federal Reserve's balance sheet, including whether the Fed is adding to its holdings of securities or letting them run off. Its decisions are recorded in the statement issued after each meeting and in the implementation note released alongside it, which is where the administered rates are written down with the date each change takes effect.

What the regional Reserve Banks do

Each regional Reserve Bank proposes its own discount rate for the Board of Governors to approve, lends to banks in its own district, and carries out the operational work that puts committee decisions into effect, such as running the auctions and facilities through which reserves move. A regional bank does not vote on the national target range unless its president holds a seat on the Federal Open Market Committee in that year, and even then the vote is on the committee's decision.

Each of these three records, the Board's rulings, the Committee's statements and implementation notes, and the individual Reserve Banks' own releases, is published separately, and reading the right one for the question at hand is usually faster than reading a summary of all three.

Where to check who is voting, and what gets published after each meeting

The current line-up of the Federal Open Market Committee (FOMC), the body that sets the federal funds target range, is not something you need to work out from news coverage. The Federal Reserve Board publishes the sitting Governors on its own website, and each of the twelve regional Reserve Banks lists its current president on its own site. Between them these pages tell you exactly who holds a seat at the table on any given date.

Who is voting this year

Not every member of the Committee votes at every meeting. The seven Governors and the president of the Federal Reserve Bank of New York vote every year; the presidents of the other eleven Reserve Banks rotate through the remaining four voting seats on an annual cycle. The Federal Reserve Board publishes the voting roster for the year alongside its account of the Committee's membership, so you can check which president holds a vote this year.

What gets published after each meeting

Each FOMC meeting leaves a paper trail, and the pieces arrive on different timetables. A policy statement and an implementation note come out on the day the meeting ends. Minutes covering the discussion follow some weeks later. A full transcript of the meeting is released only after a much longer delay, once enough time has passed that it no longer bears on live policy. All three are published by the Federal Reserve Board, and all three carry the date of the meeting they describe.

If you are checking a specific decision, start with the statement for what was decided, then the minutes for how the Committee reasoned its way there. Both are dated documents, and both are worth reading against the date printed on them.