Fomc meeting
Family IX · Macro
Not to be confused with interest rate decision, central bank, monetary policy.
FOMC meeting refers to a regular, pre-announced session of the Federal Open Market Committee, the monetary policy-making arm of the US Federal Reserve. At these meetings, committee members assess economic conditions and decide whether to adjust the target range for the federal funds rate or take other policy actions. The meeting concludes with a public statement, and often a press conference, that can move global financial markets.
Structure and schedule
The FOMC typically meets eight times per year, roughly every six to seven weeks, though the exact schedule is set annually and can vary. Each meeting spans one or two days and includes presentations on economic and financial conditions, a policy discussion, and a vote on the policy stance. The committee consists of twelve voting members: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven Reserve Bank presidents, who serve one-year rotating terms. Non-voting Reserve Bank presidents still attend and contribute to the discussion.
Policy tools and outcomes
The primary tool discussed is the target range for the federal funds rate, but the committee may also adjust other policy instruments, such as the interest rate on reserve balances or the pace of asset purchases. Decisions are announced in a statement released at the end of the meeting, followed by a press conference by the Fed Chair. In addition, the FOMC publishes meeting minutes three weeks after each session, and a summary of economic projections four times a year. These documents provide insight into the committee's outlook and the balance of views.
Market impact and example
Financial markets closely watch FOMC meetings because interest rate decisions influence borrowing costs, currency values, and asset prices worldwide. Traders often position ahead of the announcement, leading to increased volatility around the release time. The following example illustrates a hypothetical rate change and its effect on a loan.
In this example, the 25 basis point increase raises the annual interest cost by $25. Actual loan rates may vary based on the lender and the type of loan.
Often confused with
- interest rate decision
- An interest rate decision is the formal announcement by a central bank's policy committee of the target level for its policy interest rate, or of a change to that level, following a scheduled or ad hoc policy meeting.
- central bank
- A central bank is a national institution that issues legal-tender currency, sets the base interest rate, and supervises the banking system, operating under a mandate that varies by country.
- monetary policy
- Monetary policy is the set of actions a central bank takes to manage the money supply and short-term interest rates in order to influence inflation, employment and economic activity.