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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.
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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.
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Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

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References in periodicals archive ?
Until he ma[de] a big mistake he'[d] continue to get everything he wantfed]." (26) Recently, Peter Conti-Brown and Simon Johnson have described the FOMC as one dominated by its chair, an observation few would contest for the Greenspan years.
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.
* This article uses a novel data set to examine the effect of the FOMC minutes release on U.S.
Thus the FOMC issued a series of statements indicating, with increasing specificity, just how long it expected to maintain such an accommodative policy.
Each FOMC member has some, at least nominal, affiliation with one of the 12 Federal Reserve regions that were established at the time the Fed was founded.
A modern comparison describing the evolution of Fed communication was noted in 2003 by then Fed Governor Janet Yellen when she said that the FOMC "had journeyed from 'never explain' to a point where sometimes the explanation is the policy." (4) Some have termed this policy "open-mouth operations." (5) Although views may differ between policymakers and across central banks, the fundamental principles of central bank communication are founded on the dual notions that increased transparency enhances the effectiveness of policy and the accountability of policymakers in a democratic society.
As was widely expected, the FOMC, which is the policymaking arm of the Federal Reserve, held interest rates steady.
The drift in stock prices in the month or so around "surprise" FOMC announcements affected firms in almost all industries and extended to many equity markets outside of the United States.
On the FOMC's policy statement, the market is expecting steady policy rates.
To answer this question, we examine how uncertainty about future interest rates, as measured by options prices from financial markets, changed after the FOMC began releasing its participants' projections for the appropriate federal funds rate.
The Federal Open Market Committee (FOMC) is due to meet for two days starting Tuesday next week, September 20, and is expected to make an announcement about the Fed's decision on interest rates.