What is a 'Federal Open Market Committee Meeting - FOMC Meeting'

The Federal Open Market Committee (FOMC) consists of 12 members who determine near-term monetary policy. The Committee meets eight times a year, and any changes it decides on are announced immediately after the FOMC meeting.

BREAKING DOWN 'Federal Open Market Committee Meeting - FOMC Meeting'

There are 12 members of the FOMC in any given year, of which seven are members of the Board of Governors of the Federal Reserve System (FRS).  The FOMC includes the Chair of the Board, Jerome Powell; and five of the twelve presidents of the Federal Reserve Bank who serve one-year terms on a three-year rotating schedule, except the president of the Federal Reserve Bank of New York whose term on the FOMC committee is permanent.

The remaining seven of the twelve Reserve Bank presidents that are not designated members in a given year still attend the FOMC meetings.

FOMC Meeting Dynamics

During the meeting, members discuss developments in the local and global financial markets, as well as economic and financial forecasts. All participants – Board of Governors and all twelve Reserve Bank presidents – share their views on the country’s economic stance and converse on the monetary policy that would be most beneficial for the country. After much deliberation by all participants, only designated FOMC members get to vote on a policy that they consider appropriate for the period.

The results of the vote are communicated to the manager of the System Open Market Account (SOMA), who is responsible for the staff of the trading desk at the Federal Reserve Bank of New York where government securities are bought and sold. The trading desk receives the directives from the FOMC that indicate the rate the FOMC has voted for federal funds to trade at. The trading desk then proceeds to buy or sell government securities on the open market. If the members voted to maintain the current policy, no trading action from the desk would be required.

2018 Meeting Schedule

The meeting runs eight times a year. However, the FOMC can have more than eight meetings if economic conditions call for it. The Committee makes membership changes during the first scheduled meeting of the year. Furthermore, the meetings are held for one or two days, and minutes of regularly scheduled meetings are released to the public three weeks after the date of the policy decision, a vast improvement from the six- to eight-week lag that existed before December 14, 2004. The 2018 meetings are below:

  • Jan. 30-31: According to the minutes of the meeting, the Committee agreed that the labor market strengthened since the last meeting in December and that economic activity continued to see solid gains. Inflation was running below 2 percent. The Committee noted that the near-term risks to its economic outlook is balanced, but it would continue to monitor inflationary development closely. The members decided to keep the target range of the fed funds rate between 1.25-1.5 percent. Any future adjustment to the target range will be determined by economic conditions supporting maximum employment and the target inflation rate of 2 percent. This was the last meeting chaired by Janet Yellen. 
  • Mar. 20-21: The members noted that the labor market continued to strengthen and that the economy was growing moderately. They expected inflation to rise gradually to the FOMC’s target rate of 2 percent, with slight adjustments to monetary policy. The committee said it decided to raise the target range for the fed funds rate to 1.5 to 1.75 percent. However, it suggested that the rate would increase with future economic growth. In the meantime, the rate would stay at levels below expectations. This was Jerome Powell’s first appearance at the meeting since he was approved to serve as chairman of the Federal Reserve.
  • May 1-2 
  • June 12-13
  • July 31-Aug. 1
  • Sept. 25-26
  • Nov. 7-8
  • Dec. 18-19

After-Effects of FOMC Meetings

Because the Fed determines interest rate at the FOMC meeting, the announcement following this meeting is very important. Speculation often occurs weeks in advance about what will happen with interest rates following the meeting.

The expected change in rate (if any), is often priced into the markets prior to the announcement, which can cause drastic market action should the announcement be different from what was expected. Interest rate cuts can stimulate the economy, but at the same time reduce the value of the currency.

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