Seated at table, from left: Robert Diamant, economic education specialist for the New York Fed, Margaret Walton ’08, Genna Ghaul ’07 (obscured), Nikki Tyler ’07, Andrew Varani ’07, Christina Aylward ’07, and the judges, Jeffrey Lacker, Laurence Meyer (obscured), and Charles Evans. Photograph: Britt Leckman

On November 28, the day of the national championship, four teams of students, representing four universities, arrived at the U.S. Federal Reserve Bank in Washington, D.C., dressed for business. Uniformed guards led the students to a lofty, white marble atrium flanked by a pair of brass-banistered staircases, both ascending to the same massive teak double doors. The final round of the 2006 College Fed Challenge, a test of economics savvy administered by some of the nation’s most influential economists, would take place behind those doors—in the grand chandeliered room where, eight times a year, the Federal Open Market Committee (FOMC) chaired by Ben S. Bernanke determines the nation’s monetary policy.

Earlier in the month, BC’s team of undergraduate economics majors had bested the teams of Harvard, Dartmouth, Tufts, and several other colleges and universities to take first place in the New England regional round. Now they would compete against fellow finalists from Northwestern, Rutgers–Newark, and Virginia Commonwealth. It was BC’s first trip to the national competition. The challenge, simply put: Advise the Fed on whether to take steps to raise, cut, or maintain interest rates at its next meeting. The students were expected to draw economic forecasts from real variables—including inflation, employment, and wage rates, new construction, consumer debt, manufacturing inventories and investment, and international trade. The first national undergraduate Challenge took place in 2004, with the aim of promoting advanced study and careers in economics.

In a drawing held the night before, BC’s name had been plucked from a hat as the first group to compete. The other teams were sequestered in “holding areas,” small reading rooms lined with leather-bound volumes containing the minutes from past FOMC meetings; the door to each room was guarded by a security officer in the corridor.

Among the other, male-dominated teams, BC stood out with its four women and two men. “It’s not the way we planned it, it’s the way it happened,” says Associate Professor of Economics Robert Murphy, who coached the group with department colleague Fabio Ghironi, an assistant professor who once worked in the research department of the New York Fed. Murphy and Ghironi chose the team’s members from among the standout students in their classes, giving three of the six spots to seniors with regional Challenge experience, Genna Ghaul, Nikki Tyler, and Andrew Varani, and allotting the other three spaces to new additions, Christina Aylward ’07, Margaret Walton ’08, and, as alternate, Jamison Davies ’08. “This is a group of incredibly motivated students,” says Murphy, who along with Ghironi gave the team research guidance and support but had little to do with their ultimate analyses.

Nearly two months before the regional competition, the BC team began its preparations, poring over newspapers, financial journals, and the minutes of previous FOMC meetings. Each team would be required to make a 20-minute presentation stating and defending its policy recommendation before a panel of three judges. After that would come 15 minutes of judges’ questions, ranging over the specifics of the presentation and general economic theory. While Challenge teams have sometimes opted for creative approaches—in a previous competition, Murphy recalls, one group staged a poker game among the FOMC members—BC chose to make a straightforward presentation of the facts. “In the end, it’s all about substance,” says Varani. “We were presenting to a panel of economists. They tend not to be persuaded by drama or artistic vision.”

When the judges entered the room and took their seats across from the BC team, at the very 27-foot mahogany and granite table at which the FOMC regularly assembles, the room immediately fell quiet. Officiating were Jeffrey Lacker, president of the Federal Reserve Bank of Richmond and one of the 12 members of the 2006 FOMC; Charles Evans, director of research at the Federal Reserve Bank of Chicago; and Laurence Meyer, a former member of the Fed’s Board of Governors. Their names were familiar to the students. “We came across them a lot, either in the newspaper, or in our research,” says Tyler, who was too nervous to eat on the day of the competition.

Lacker, midway down the table in Chairman Bernanke’s traditional seat, briefly reviewed the format. The team’s conclusions need not match those of the actual FOMC, he said, receiving a few laughs from the small audience seated in the rear of the room; over the past four months, as the Fed had left interest rates unchanged, Lacker had been the lone dissenter on the committee, voting repeatedly to raise them.

Note cards in hand, the BC team calmly began their 34-page PowerPoint presentation. Walton opened with an overview of current economic conditions, and for the next 20 minutes, the five teammates took turns directing the judges’ attention to line graphs and bullet points projected onto a screen hanging above the boardroom’s marble fireplace.

As Aylward explained later, the team had determined that “the risks and pressures balanced each other out.” While the economy showed some signs of weakness, notably a cooling housing market, employment growth had remained relatively steady, consistent with a healthy rate of economic activity, and a recession seemed unlikely—so there was “no need” to trigger lower interest rates by reducing the federal funds rate. On the other hand, U.S. households took on a high amount of debt before the current cooldown, and rising unit labor costs, driven largely by wage increases, could cause further inflationary pressures in the future, “so we [couldn’t] really raise the rate either,” she said.

The team’s recommendation: keep the target for the federal funds rate at the current 5.25 percent.

At 4 p.m., after four hours spent in presentations and holding rooms, the teams filed back into the FOMC conference room to await the deliberating judges and the final results. None would go home empty-handed: Moody’s Foundation, the philanthropic arm of Moody’s Investors Service, had provided prizes for all of the finalist teams, ranging from $25,000 to $5,000—to be split 60/40 between the students and their alma maters.

Taking seats in the plush, high-backed chairs surrounding the conference table, team members whispered and laughed nervously, snapping photos of the half-ton gold and lacquer chandelier above them and the sprawling marble bald eagle carved in relief over the mantle. After meeting privately for about 45 minutes, the judges reappeared. At the welcome dinner the night before, each team had been asked to pose with a blank, oversize cardboard check, feigning pride and glee. The dollar values would be Photoshopped in later, they were told. Now, as the judges announced the awards in reverse order, teams’ smiles grew broader with each prize bestowed. In fourth place, Virginia Commonwealth University; in third, Rutgers–Newark. The remaining finalists, BC and Northwestern (whose team had won the competition in the two previous years) both looked hopeful, but it was BC whose name was called next, as first runner-up, to receive $15,000. An ecstatic cheer arose from the Northwestern team as they jumped out of their seats and hugged one another, then turned back to applaud their co-competitors. The BC team clapped and stood more slowly, followed gradually by Virginia and Rutgers and the coaches sitting by the boardroom doors, and the room became a swarm of dark suits.

A few weeks later, murphy invited the BC team to his home for a celebratory dinner. “$15,000 isn’t too bad a deal,” he said. “And we know better now what we can work toward next year.”

According to Aylward, who hopes to join the Boston Federal Reserve Bank next year as a researcher, all four finalist teams had recommended “leaving the interest rate unchanged.” Two weeks after the competition, at the December 12 meeting of the FOMC, the committee—with the exception of Lacker—officially agreed, allowing the rate to stand for the fourth time since August.

Read more by Cara Feinberg