From time to time, the Federal Reserve is criticized for conducting monetary policy in an ivory tower. From high a top that tower, so the argument goes, the Fed enacts its policies, unaware of their effects on the nation's workers, consumers and businesses.
Unfortunately, this criticism reflects a fundamental misunderstanding of the Fed's decentralized structure and the opportunities it affords us to stay in touch with regional concerns. As president of the St. Louis Fed, for example, I spend almost a fourth of my time talking with and listening to various constituencies in the Eighth Federal Reserve District. Other Bank staff spend time in similar endeavors. Our contacts are far-ranging, including:
Similar programs are going on in other Fed Districts. No doubt, my counterparts find, as I do, that the public is eager for the opportunity to interact directly with a principal in the monetary policymaking process. Not surprisingly, such interaction leads to some frank exchanges about economic prospects.
The point here is that the Fed's unusual structure—with policymaking balanced between a central board in Washington and 12 Reserve Banks in the field—ensures that national policies are never enacted from an ivory tower. In my view, it should be no other way.
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Fed in Print: An index of the economic research conducted by the Fed.