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Federal Open Market Committee (FOMC)

The body that is responsible for setting the interest rates and credit policies of the Federal Reserve System.

Federal Open Market Committee

An arm of the Federal Reserve System charged with setting standards for open market operations. That is, the FOMC sets the monetary policy for the United States by buying and selling securities and setting key interest rates, especially the rate at which banks lend each other money for overnight loans. Selling government securities and raising interest rates are how the Federal Reserve reduces the amount of money in the economy; these tools are used to slow unsustainable growth and to curb inflation. Buying securities and lowering interest rates increase the amount of money in the economy and are used to spur growth.

The Committee meets eight times per year and consists of the seven members of the Federal Reserve Board of Governors and five of the 12 Reserve Bank presidents. Four of the five presidents alternate for one-year terms, while the President of the New York Federal Reserve serves ex officio. It operates independently, although the Chairman of the Federal Reserve is required to appear before Congress at intervals. Somewhat controversially, its meetings are conducted in secret.


Federal Open Market Committee (FOMC).

The Open Market Committee (FOMC) of the Federal Reserve Board meets eight times a year to evaluate the threat of inflation or recession.

Based on its findings, the 12-member FOMC determines whether to change the discount rate or alter the money supply to curb or stimulate economic growth.

For example, the FOMC may raise the discount rate, which the Federal Reserve charges member banks to borrow, with the goal of tightening credit and limiting inflationary growth. It may lower rates to encourage borrowing and economic expansion. Or it may take no action.

Changes in the discount rate result in virtually immediate changes in the short-term rates that banks charge consumers -- and each other -- to borrow.

The Federal Reserve Bank of New York implements FOMC decisions to alter the money supply. It buys government securities to put more money into circulation and loosen credit or it sells securities to take money out of the market and tighten credit.

References in periodicals archive ?
The FOMC is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities, and of rolling over maturing Treasury securities at auction, the Fed said.
Prior to the FOMC Minutes being released, there were some signs of USD weakness in the currency markets and this resulted in both the Eurodollar and Cable appreciating from some risk appetite.
Official records of FOMC policy decisions identify all members' votes, including those who voted with the majority and those, if any, who dissented.
Majors: Since the FOMC announcement the EUR has lost significant ground, from 1.
The information on uncertainty now reported in the SEP helps to give the public a much more complete picture of the FOMC participants' assessment of overall macroeconomic conditions.
Although the federal funds rate has been near zero since the financial crisis and the FOMC has indicated that it will likely be there for a considerable time, eventli2lly short-term interest rates will increase and become important again in monetary policy making.
The asset price response to the FOMC minutes has declined since 2008, suggesting greater transparency by the Committee.
Bullard also notes that recent FOMC policy announcements have been followed by a substantial rise in Treasury yields.
A significant change in the statement by the FOMC, however, was a downgrade in the economic growth outlook.
Regarding other potential risks, including concerns that the FOMC has done too little, Bullard said, "If anything, the Committee may be trying to do too much with monetary policy, risking monetary instability for the U.
Le communique du FOMC montre que le consensus majoritaire en son sein plaide pour le maintien d'une politique monetaire ultra-accommodante pour soutenir la reprise economique entamee a l'ete 2009 vu que l'inflation semble maEtrisee.
The FOMC minutes for 2006 do much to dismiss the stereotype of central bankers as sour, dour, dull, and dreary pedants and geeks.