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August/September 1981

The FOMC in 1980: A Year of Reserve Targeting

by R. Alton Gilbert and Michael E. Trebing

On October 6, 1979, the Federal Reserve announced the beginning of a new approach to the implementation of monetary policy it would attempt to achieve better control of the growth of the monetary aggregates by “placing greater emphasis in day-to-day operations on the supply of hank reserves and less emphasis on confining short-term fluctuations in the federal funds rate.” A reason for adopting such a strategy was to “assure better control over the expansion of money and bank credit.” The 1980 calendar year was the first full year of monetary policy under the new procedure of reserve targeting. This article discusses the monetary policy decisions of the Federal Open Market Committee during 1980.