Michelle R. Garfinkel examines the various economic factors that influenced the deliberations and decisions of the Federal Open Market Committee in 1988. Garfinkel points out that, among other things, the potential long-term effects of the stock market crash of October 1987, the continuing movements in the value of the dollar in foreign exchange markets, and the changing relation between the monetary aggregates and nominal output generated unusual uncertainty among the FOMC members about the economic outlook. In light of this uncertainty, the FOMC sought greater leeway in targeting money growth and adopted a more flexible strategy for implementing short-run policy. To understand the intended role of greater flexibility in monetary policy, Garfinkel reviews the long-run and short-run policy decisions of the FOMC during 1988. The discussion focuses on how the changing economic environment and the FOMC’s desire for greater operational flexibility influenced the evolution of monetary policy throughout the year.