The Region

Monetary Policy Environment

Published August 1, 1988  |  August 1988 issue

1900-1919

Proper regulation of the size of the money supply perceived to come about largely automatically through banks' rediscounting short-term paper at Federal Reserve Banks
Initial perception of relatively autonomous regional "credit policy" by Federal Reserve Banks, i.e., Reserve Banks would set own district discount rates, which might differ from other districts
Charles S. Hamlin, chairman, Federal Reserve Board/1914
W.P.G. Harding, chairman, Federal Reserve Board/1916

1920s

Open market operations discovered and need for coordinated national monetary policy realized in early '20s
Daniel R. Crissinger, chairman, Federal Reserve Board/1923
Roy A. Young, chairman, Federal Reserve Board/1927

1930s

Eugene Meyer, chairman, Federal Reserve Board/1930
Eugene R. Black, chairman, Federal Reserve Board/1933
Marriner S. Eccles, chairman, Board of Governors/1934

1940s

Fed supports war finance program of U.S. Treasury by pegging Treasury bond rates at low levels
Thomas B. McCabe, chairman, Board of Governors/1948

1950s

Federal Reserve-Treasury "accord" frees monetary policy from fixing Treasury bond rate, allows ease or restraint to adjust to general economic conditions/Early '50s
William McChesney Martin, chairman, Board of Governors/1951
Monetary policy defines a "leaning against the wind" strategy/1950s

1960s

Monetary policy strategy of "leaning against the wind" generally accommodates fiscal policy in period of rising stimulus/1960s

1970s

Arthur F. Burns, chairman, Board of Governors/1970
Fed announces monetarist strategy to reduce money growth rates over a period of years as a way of eliminating inflation/1975
Money supply generally outgrows announced objectives as a result of an open market operating procedure focusing on target interest rates for federal funds/1976-79
G. William Miller, chairman, Board of Governors/1978
Paul Volcker, chairman, Board of Governors/1979
Fed adopts a change in operating procedure focused on attaining target levels of bank reserves supplied through open market
operations/1979

1980s

Rapid innovation of new types of market or fixed interest-bearing spendable accounts causes the traditional relationship between money growth rates, spending and inflation to break down, at least for the present/1982 and later
Fed reduces its emphasis on money supply measures, especially M1, as strategic targets for monetary policy, and puts more weight on interest-rate targeting as an operating procedure/late 1982
Alan Greenspan, chairman, Board of Governors/1987

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