fomc. here again, congress has designed the system with a number of checks and balances. since 1935, the composition of the fomc has included the seven governors in washington, who are appointed by the president of the united states and confirmed by the senate, as well as the president of the new york fed, and four other reserve bank presidents who serve one - year terms as members on a rotating basis. whether we vote or not, all reserve bank presidents attend the fomc meetings, participate in the discussions, and contribute to the committee ’ s assessment of the economy and policy options. the fomc has eight regularly scheduled meetings each year to set monetary policy. the first one in 2014 was held just two weeks ago. in normal times, the committee votes to adjust short - term interest rates to achieve the goals of monetary policy that congress has set for us. congress spelled out the current set of monetary policy goals in 1978. the amended federal reserve act specifies that the fomc “ shall maintain long run growth of the monetary and credit aggregates commensurate with the economy ’ s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long - term interest rates. ” since moderate long - term interest rates generally result when prices are stable and the economy is operating at full employment, many have interpreted these instructions as being a dual mandate to manage fluctuations in employment in the short run while preserving price stability in the long run. economic conditions in order to determine the appropriate monetary policy to promote these goals, the fomc must monitor and assess economic developments. so, let me turn to an assessment of our economy as we enter 2014. in a nutshell, my view is that the economy is on firmer footing than it has been for the past several years. so let ’ s look at some of the details of how last year ended and the implications for the coming year. bis central bankers ’ speeches real output grew at a 3. 2 percent annual pace in the fourth quarter of last year, following a 4. 1 percent growth rate in the third quarter. that means economic growth doubled in the second half of 2013 compared with the first half. consumer spending and business investment in equipment ended the year with strong increases. inventory investment and net exports also contributed to growth. on the other side of the ledger, a decline in residential investment and a sharp decrease in federal government spending subtracted from growth in the

the reserve banks, the board delegates authority to the staff in the 12 reserve banks to provide the boots on the ground for effective supervision of the covered institutions in their districts. as of february 17, 2015, there were five governors serving, with one more nominee awaiting senate confirmation. bis central bankers ’ speeches the reserve banks also act as the bank for the u. s. treasury. they work closely with the treasury to develop payment processes, such as making payments on the public debt, distributing payments to social security recipients, and so forth. the banks also support community development activities, including research and engaging organizations to find effective and impactful development solutions that promote the federal reserve system ’ s economic growth objectives in low - and moderate - income communities. setting monetary policy of course, most people think of the federal reserve as being responsible for setting and executing monetary policy. here, too, the reserve banks play an important role. in the early decades of operations, the reserve banks came to learn that buying and selling assets on the open market had an influence on the money supply. in fact, they found that if they didn ’ t coordinate their actions, they could encounter unintended consequences as they may act at cross purposes. so, in 1923, early leaders, such as benjamin strong in new york and george norris here in philadelphia, helped organize a committee to coordinate open market operations. this eventually led congress to formally create the federal open market committee, or fomc, as the formal body within the fed responsible for monetary policy. since the banking act of 1935, the composition of the fomc has included the seven governors in washington, d. c., the president of the new york fed, and the presidents of four other reserve banks, who serve one - year terms as members on a rotating basis. these rotations ensure that all regions are represented in the formation of monetary policy. the composition gives the board of governors the majority of votes. however, whether we vote or not, all reserve bank presidents attend the fomc meetings, participate in the discussions, and contribute to the committee ’ s assessment of the economy and policy options. the fomc has eight regularly scheduled meetings each year to set monetary policy. it discusses economic conditions and, in normal times, decides the path of short - term interest rates to achieve the goals of monetary policy that congress has set for us in the federal reserve act. when preparing for the fomc meetings, participants rely on their economic research departments to