| INSTRUCTOR DISCUSSION NOTES:
June was Jumpin' for Consumer Prices |
1. Use any source available to identify the make up of the F.O.M.C. Why does the F.O.M.C. seems to favor one Fed district above all of the others?
The Federal Open Market Committee (FOMC) consists of twelve members--the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis. The rotating seats are filled from the following four groups of Banks, one Bank president from each group: Boston, Philadelphia, and Richmond; Cleveland and Chicago; Atlanta, St. Louis, and Dallas; and Minneapolis, Kansas City, and San Francisco. Nonvoting Reserve Bank presidents attend the meetings of the Committee, participate in the discussions, and contribute to the Committee's assessment of the economy and policy options.
The Federal Reserve Bank of New York is a permanent member of the FOMC. The status accorded the New York Fed is in recognition of the unique role that the Bank plays in the Federal Reserve System. For example, all of the open market operations-the buying and selling of U.S. government securities in the secondary market to influence money and credit conditions in the economy-that the Federal Reserve conducts are carried out by the New York Fed.
The FOMC holds eight regularly scheduled meetings per year-one about every 6 weeks. At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.
This information comes from http://www.federalreserve.gov/FOMC/ and http://www.ny.frb.org/aboutthefed/fedpoint/fed48.html. Each of these site are a great source for additional information on the structure of the Fed.
2. Discuss the differences between the Consumer Price Index and the core Consumer Price Index.
The Consumer Price Index (CPI) is a fixed-basket price index. It represents the price of a constant quantities basket of goods and services purchased by the average consumer. The CPI is intended to represent consumer purchases over a wide range of categories such as housing, food, transportation, medical care, energy, etc. The CPI is considered to be an average price of goods and services, and is frequently used as a measure of changes in the cost of living. Some analysts and the Fed specifically, like to focus on the core CPI, which excludes the volatile food and energy sectors of the economy. The core index is considered a more accurate measure of the underlying rate of inflation and gives a better gauge for which monetary policy to follow since the volatility has been removed from the measure of inflation.
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