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 are the primary sources of market risk?

    Market risk is the risk of loss due to the factors that affect an entire market or asset class. Market risk is also known ... Read Full Answer >>
  2. In what types of economies are regressive taxes common?

    Regressive taxation systems are more likely to be found in developing countries or emerging market economies than in the ... Read Full Answer >>
  3. What is the Federal Reserve Board's market risk capital rule?

    The Federal Reserve Board’s market risk capital rule, or MRR, sets forth the capital requirements for banking organizations ... Read Full Answer >>
  4. How does the law of supply and demand affect monetary policy in the United States?

    The law of supply and demand affects monetary policy in the United States through the adjustment of interest rates. Interest ... Read Full Answer >>
  5. What does it signify if there is a large discrepancy between a nation's real and ...

    A large discrepancy between a nation's real and nominal GDP signifies inflationary or deflationary forces in the economy. ... Read Full Answer >>
  6. How do tariffs protect domestic industries?

    Tariffs are essentially taxes or duties placed on an imported good or service by a domestic government, making domestic goods ... 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. Economics

    Will The US Economy Rebound In The 2nd Quarter?

    Most investors know that U.S. 1st quarter growth numbers aren’t pretty. Economic statistics have been missing expectations by the largest margin since 2009
  8. Economics

    What Part of the Money Supply is M2?

    M2 is the part of the money supply economists use to analyze and predict inflation.
  9. Economics

    Understanding Structural Unemployment

    Structural unemployment is an economic miss-match where workers fail to find jobs and employers with available jobs fail to find workers.
  10. Economics

    The U.S. Economy May Be Stronger Than You Think

    While the economic performance in the U.S. broadly disappointed in the first quarter, temporary factors presented one-off events that depressed output.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center