What Is the Shadow Open Market Committee (SOMC)?

The Shadow Open Market Committee (SOMC) is an independent organization, created by two university professors, Karl Brunner of the University of Rochester and Allan Meltzer of Carnegie-Mellon University, in 1973. As its name implies, its original purpose was to evaluate the policy and actions of the Federal Reserve Bank's Federal Open Market Committee (FOMC), the body in the Fed responsible for deciding on monetary policy action. Over the years, the SOMC has broadened its scope to evaluate a wide range of economic policy issues. The SOMC is sometimes also referred to as the Shadow Fed.

Understanding Shadow Open Market Committee (SOMC)

The Shadow Open Market Committee (SOMC) is comprised of members drawn from both academic institutions and private organizations. It currently has nine members (eight of whom are currently academics, some of whom also have past practical experience working in the Federal Reserve or other central banks).

The issues the Committee analyzes cover a wide range of macroeconomic and public policy-related issues, from monetary and fiscal policy to international trade and tax policy. That said, many of the position papers published by the Committee still tend to focus on monetary policy or other central bank policy considerations. The SOMC intends that its analyses and publications about policy will help inform the wider policy debate (including among journalists and the public) and thereby help improve policy.

SOMC Process

It has a formal approach to its work: it meets regularly (on a semi-annual basis), and each meeting discusses papers that have been prepared on various policy issues by members. Following discussion of the contents of these, the SOMC releases a Policy Statement that summarizes the most important policy recommendations of the Committee. At the March 2018 meeting, topics of papers included central bank digital currency, the Fed's forecasts (and uncertainty around them) and monetary policy instability. Keynote address speakers at the meetings tend to be various Federal Reserve members, but have also included central bankers from other countries, including Mervyn King, former Governor of the Bank of England and Axel Weber, former President of the Deutsche Bundesbank.

The SOMC has formally entered into a partnership with E21, another independent economic policy research organization.