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Federal Open Market Committee (FOMC)
Federal Open Market Committee
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.