Federal Open Market Committee - FOMC

Federal Open Market Committee - FOMC

The branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the Board of Governors, which has seven members, and five reserve-bank presidents. The president of the Federal Reserve Bank of New York serves continuously, while the presidents of the other reserve banks rotate in their service of one-year terms.

Notes:

The FOMC meets eight times per year to set key interest rates, such as the discount rate, and to decide whether to increase or decrease the money supply, which the Fed does through buying and selling government securities. For example, to tighten the money supply, or decrease the amount of money available in the banking system, the Fed sells government securities. The meetings of the committee, which are secret, are the subject of much speculation on Wall Street, as analysts try to guess whether the Fed will tighten or loosen the money supply, thereby causing interest rates to rise or fall.

See also: Alan Greenspan, Discount Window, Federal Funds Rate, Federal Reserve Bank, Federal Reserve System, Federal Reserve Board (FRB), Interest Rate, Monetary Policy, Moral Suasion, Open Market Operations, Prime Rate, Reserve Requirements