FOMC


Also found in: Acronyms.

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.

FOMC

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 ?
Sharing similar insights, Diego WE-rgler, Head Investment Advisory Middle East at Julius Baer added, "The fact that four policy-voting presidents of Fed District banks in the FOMC are to be exchanged bears the risk that the future Fed-Board might be keener at rising interest rates in order to fight inflation pressure.
The FOMC releases a statement after each of its meetings that announces any desired changes to the federal funds rate and other policy tools, describes its assessment of current macroeconomic circumstances, and possibly describes how further developments could influence its future policy choices.
Specifically, we find the level of uncertainty on the day before and the day of an FOMC announcement decreased after the FOMC began releasing interest rate projections.
I should note that I will discuss the process of scaling back accommodation mostly from the perspective of our interest rate decisions, which my FOMC colleagues and I see as our primary tool for actively adjusting the stance of monetary policy when our actions are not constrained by the zero lower bound on short-term interest rates.
He agreed that the upcoming FOMC dialog will again attract some attention, adding that there is a likelihood that the rates will be increased.
To quantify changes in the thinking of FOMC participants, Bernanke looks at the views expressed by individual participants -- specifically in the Fed's Summary of Economic Projections.
In its statement, the FOMC noted the labor market strengthened and economic activity has been expanding at a moderate rate.
Bullard also reiterated the need for monetary policy to be more clearly data dependent and whether the FOMC should rethink its approach to the Summary of Economic Projections.
But the degree of reliance on tradition sets the FOMC apart.
The FOMC pegs the optimal inflation rate for these twin objectives at 2 percent.
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.
This article examines dissents on FOMC monetary policy votes since 1936 with two main objectives.