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In the competition, Federal Reserve Board members judged students representing 119 schools on their interpretation and reaction to the same economic data, including jobs reports and the inflation rate, that the Federal Reserve Board itself considers.

The annual competition requires students to act as Federal Reserve Board members, presenting conclusions they believe the actual board would reach. Each team has five members, with two more in reserve, to argue their reasoning.  

“They have to look at what’s going on in the economy in terms of inflation, unemployment, growth, the stock market, etc.,” Doyle said, “and then what they would do if they had a voting decision on the board, whether to raise interest rates, or lower interest rates, or do something else.”

Doyle, an associate professor of economics, teaches students about the Federal Reserve in his Money and Banking courses and coaches the Federal Reserve College Challenge team. (Photo by Matt Riley, University Communications)

The challenge is two-tiered, with students making a short video presentation in October, analyzing economic data and deciding what to do with interest rates. Judges – senior economists who lead divisions that provide research and advice to Powell at the Federal Reserve Board – rated the videos. The teams that made it through the first phase then had an online session in November when Reserve members questioned them. 

In its initial presentation, the UVA team called for a 0.25% decrease in the interest rate. Shortly after, the Federal Reserve issued a 25 basis points cut. Many banks base their prime rates partly on the federal funds rate – the rate that banks charge each other for short-term loans – set by the Federal Open Market Committee.

“We were asked if we thought that the Fed could bring both sides of its dual mandate, managing inflation and unemployment, into equilibrium,” said Micah Andrews, a second-year economics and politics major from Altavista. “And then we were asked, do we see a pathway to get there? It was, in my opinion, a setup question, because if you say, ‘No, that’s not possible,’ then you’re not really thinking like the Fed, because the whole point of the Fed is to fix unemployment and inflation and to do them both together.”

Andrews joined the team last year, not knowing anything about monetary policy and setting interest rates. Now she says she has better appreciation of what it takes to predict Federal Reserve Board action. 

The Federal Reserve College Challenge Team debates fine points of economics with their professor. The team, from left, consists of Tyler Ruvolo, Maggie Doyle, Micah Andrews, Olivia Bernard, economics professor Carter Doyle, Ben Kim and Justin Sword. (Photo by Matt Riley, University Communications)

“The members of the Federal Reserve grill the students about their presentation and different monetary policy scenarios,” Doyle said. “Questions that get at the essence of ‘What would you do? Why did you recommend that? What would that change in terms of the Fed achieving its goals?’ It’s a back and forth that we don't know what the questions are.”

In the challenge, the team was graded less on its answer than on its collaboration and reasoning in reaching that answer. 

One dissenter was Justin Sword, a fourth-year economics major from New York City who chaired the team. 

“My personal stance on this was that we should hold rates where they were, rather than cut them,” Sword said. “There wasn’t a complete consensus in terms of what we actually think the policy should have been. But there’s another aspect to this competition – you have to keep in mind what the Federal Reserve would want to hear.”

Sword said the UVA team recognized there were external reasons influencing the Federal Reserve’s actions.

“It’s a very hard competition,” Doyle said. “There are all these issues that they have to grapple with and it is very open-ended. There’s no real prompts.”