Federal Open Market Committee - FOMC

AAA

DEFINITION of 'Federal Open Market Committee - FOMC'

The branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the board of governors, which has seven members, and five reserve bank presidents. The president of the Federal Reserve Bank of New York serves continuously, while the presidents of the other reserve banks rotate their service of one-year terms.

INVESTOPEDIA EXPLAINS 'Federal Open Market Committee - FOMC'

The FOMC meets eight times per year to set key interest rates, such as the discount rate, and to decide whether to increase or decrease the money supply, which the Fed does by buying and selling government securities. For example, to tighten the money supply, or decrease the amount of money available in the banking system, the Fed sells government securities. The meetings of the committee, which are secret, are the subject of much speculation on Wall Street, as analysts try to guess whether the Fed will tighten or loosen the money supply, thereby causing interest rates to rise or fall.

RELATED TERMS
  1. Discount Rate

    The interest rate charged to commercial banks and other depository ...
  2. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds ...
  4. Permanent Open Market Operations ...

    When the Federal Reserve buys or sells securities outright in ...
  5. Federal Reserve Bank Of Atlanta

    The Federal Reserve bank responsible for the sixth district and ...
  6. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
RELATED FAQS
  1. What agencies were created by the Glass-Steagall Act?

    The Glass-Steagall Act, also known as the Banking Act of 1933, was proposed and passed by Congress in response to the failure ... Read Full Answer >>
  2. How can I create a yield curve in Excel?

    You can create a yield curve in Microsoft Excel if you are given the time to maturities of bonds and their respective yields ... Read Full Answer >>
  3. What are the different formations of yield curves?

    There are three main different formations of yield curves: normal, inverted and flat yield curves. The yield curve describes ... Read Full Answer >>
  4. What does a large multiplier effect signify?

    The multiplier effect depends on banks' reserve requirements. In macroeconomics, if a country exhibits a large multiplier ... Read Full Answer >>
  5. What is the criteria for a simple random sample?

    Simple random sampling is the most basic form of sampling and can be a component of more precise, more complex sampling methods. ... Read Full Answer >>
  6. How is money supply used in monetary policy?

    Regulating the money supply is the sole tool of the Federal Reserve's monetary policy. The Federal Reserve can affect the ... Read Full Answer >>
Related Articles
  1. Economics

    Is Your Stock Headed South?

    Don't let your portfolio go with it! Find out which signs to watch out for.
  2. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  3. Forex Education

    Get To Know The Major Central Banks

    The policies of these banks affect the currency market like nothing else. See what makes them tick.
  4. Forex Education

    How To Trade Forex On News Releases

    When economic data comes out, it can have a marked impact on the currency market. Find out how to profit.
  5. Investing Basics

    Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
  6. Credit & Loans

    How Interest Rate Cuts Affect Consumers

    Traders rejoice when the Fed drops the rate, but is it good news for all? Find out here.
  7. Investing Basics

    What is a Nominal Value?

    The nominal value of a security, such as a stock or bond, remains fixed for the duration of its life.
  8. Economics

    Explaining the Human Development Index

    The Human Development Index (HDI) is a metric developed by the United Nations to take the emphasis off economic growth and focus on human wellbeing.
  9. Investing

    What A Rate Hike May Mean For Stocks

    By the end of the year, investors will likely be contending with the first Federal Reserve (Fed) rate hike in nearly a decade.
  10. Professionals

    Why You Should Avoid Fixating on Bond Duration

    Financial advisors and their clients should then focus on a bond fund’s portfolio rather than relying on any single metric like duration.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center