Federal Open Market Committee


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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)

A policy-making committee within the Federal Reserve that has the responsibility for establishing and carrying out open-market operations. Policies and decisions of the committee have a substantial impact on interest rates and the securities markets. The FOMC is composed of the 7 members of the Board of Governors of the Federal Reserve System and presidents from 5 of the 12 Federal Reserve Banks. Also called Open Market Committee.

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 ?
In view of his impending departure and in keeping with Federal Open Market Committee practice, he did not attend the August 9, 2005, meeting of the FOMC.
At their last meeting of this year, Fed Chairman Alan Greenspan and his Federal Open Market Committee colleagues opted to hold the federal funds rate steady at 1.
Sternlight was involved in the bank's open market operations -- the primary area for implementing monetary policy that is established by the Federal Reserve's Federal Open Market Committee -- for most of his long career at the bank.
Recent comments suggest the Federal Open Market Committee doesn't know what it will do in June.
The Federal Open Market Committee decided on May 3, 2005, to raise its target for the federal funds rate 25 basis points, to 3 percent.
Also, the Federal Open Market Committee, which determines interest rates, will have its next meeting.
The major market indices have moved higher, but are now basically in a holding pattern as investors breathlessly await news from the Federal Open Market Committee and the assumed quarter-point rate hike.
The Federal Reserve Board and the Federal Open Market Committee, released on May 24, 2005, the minutes of the Committee meeting held on May 3, 2005.
The Federal Open Market Committee, composed of Fed board members and regional bank presidents, concluded its closed-door deliberations with a brief announcement saying that ``in light of market uncertainties associated with the century date change'' it was important to focus policy on ``ensuring a smooth transition into the Year 2000.
During that period, he served as the vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy.
On December 14, 2004, the Federal Open Market Committee (FOMC) decided to move up the publication of its minutes to three weeks after the end of each meeting.
The Federal Open Market Committee decided on February 2, 2005, to raise its target for the federal funds rate 25 basis points, to 2 1/2 percent.

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