but by considering a broader range of economic factors. i find this relatively public debate to be both instructive and healthy. it provides evidence of the depth of understanding and analysis by fomc members and supports the integrity of fomc voting patterns when observers note that ben and don have recorded identical votes during their tenures. one other thought on the fomc tendency for unanimous votes concerns the nature of chairman greenspan's leadership. the chairman encourages forthright and thorough discussion. he seeks consensus among fomc members, and the personal views he interjects into the discussion serve more as a beacon than a command. as a result, he achieves consensus through the quality of his leadership and the depth of his analysis. a final observation concerns the limitations of monetary policy. during the months between my nomination and swearing - in to the board, i read numerous articles and talked with many monetary policy authorities. a common theme during that time of preparation concerned monetary policy's limitations. in his come with me to the fomc article, larry meyer wrote eloquently on this very point. i will try to make the same point. the primary role of monetary policy is to achieve price stability. inflation, as milton friedman famously said, is always a monetary phenomenon. to control the supply of money is also, in the long run, to control the rate of inflation. by contrast, monetary policy does not as directly influence employment or output. therefore, much of the historic strength and resilience of the u. s. economy is only tangentially influenced by monetary policy. obviously, output and employment benefit from the environment of price stability that monetary policy works to achieve. monetary policy is also a blunt instrument. it does not, and cannot, target a particular segment of society or of the economy. fomc members become very conscious of this fact as every part of the economic cycle seems to benefit some and penalize others. overwhelmingly, however, monetary policy aimed at achieving price stability and maximum sustainable employment over time provides the best environment for job creation and improving living standards. it has been my privilege to associate with the men and women who constitute the federal open market committee. without exception, it is a dedicated, committed, and talented group that fully understands both the responsibilities and the limitations of making monetary policy for the united states. i hope this presentation has provided some insight into how we carry out our responsibilities.

##omc members resume their discussion, focusing now on their policy preferences. in the twenty fomc meetings in which i have participated, chairman greenspan's participation in the discussion until this point has been limited. i suspect that this fact might surprise most fomc observers as chairman greenspan, like virtually all of his predecessors, is considered almost the personification of monetary policy. yet before the chairman offers his first substantive comments at these meetings, eighteen other participants, representing literally hundreds of hours of study and analysis, have provided their input. considering the complexity of the u. s. economy and the implications of monetary policy on the world economy, the issue facing each fomc member is deceptively simple. we establish a target interest rate for what is known as federal funds - or, more commonly, fed funds. fed funds constitute an interbank arrangement that allows banks with surplus balances at their federal reserve bank to loan those funds overnight to banks that temporarily need to borrow to meet their balance requirements. an individual bank's balances on their federal reserve accounts can vary significantly depending on the dollar amount of the checks cleared that day, the volume and sequence of wire transfers in and out of the bank's account, and changes in investment or lending at the bank. in the aggregate, fed funds are an important indicator of liquidity in the banking system and, by implication, the money supply. all fed funds loans are for a single day, and the interest rate is reestablished daily. fed funds rates thus are an excellent barometer of both the price of money and the changes in the money supply. the federal reserve act requires that monetary policy promote maximum employment, stable prices and moderate long - term interest rates. happily, in this instance, congressional intent is also sound monetary policy. former federal reserve chairman paul volcker once said, “ no central bank can - or should, in my judgment - conduct policies for long that are out of keeping with basic, continuing objectives of the political system. ” 2 when i was a young banker in the 1960s, many of my loan customer's decisions were affected at least in part by memories of the great depression. while depression fears were widespread, the ravages of high inflation elsewhere, such as post - world war i europe, had not been experienced here. in fact, many people had a positive view of inflation as leading rising property values and were not convinced that inflation was inherently bad. public policy decisions with inflationary implications -