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April 1985, 
Vol. 67, No. 4
Posted 1985-04-01

The FOMC in 1983-84: Setting Policy in an Uncertain World

by R. W. Hafer

R. W. Hafer examines the numerous factors affecting the policy decisions made by the Federal Open Market Committee (FOMC) during the past two years. In “The FOMC in 1983-84: Setting Policy in an Uncertain World,” Hafer notes that the environment in which the FOMC set policy was changing in unpredictable ways: Financial innovations in late 1982 and early 1983 caused some concern over the correct measurement of the key monetary aggregates M1 and M2; the depth and breadth of the economic recovery in 1983 was unclear; and the size of the federal deficit caused constant concern about its impact on financial markets. To understand the effects that these varied aspects had on policy decisions, Hafer reviews both the long- and short-run policy discussions of the FOMC. These discussions are set in the economic climate at the time of their formation and are examined with hindsight to gauge their relative success. In addition, a detailed supplement providing selected excerpts from the published “Minutes” of the FOMC meetings provides a useful chronology of policy discussions during 1983 and 1984.