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 ?
At a recent Treasury Committee hearing the Bank was asked to consider making and keeping full transcripts with a view to releasing them after a number of years, transcripts of monetary policy discussions in some other central banks are, or will be, published, with those of the Federal Open Market Committee in the United States being published after five years and in the euro area, records of ECB Governing Council meetings will be published after thirty years.
The Federal Open Market Committee decided on November 1, 2005, to raise its target for the federal funds rate 25 basis points, to 4 percent.
On October 11, 2005, the Federal Reserve Board and the Federal Open Market Committee released the minutes of the Committee meeting held on September 20, 2005.
In a nine-to-one vote, the policy-setting Federal Open Market Committee opted to increase the benchmark federal funds rate charged on overnight loans between banks a quarter of a percentage point to 3.
On Tuesday, September 21, the Federal Open Market Committee raised short-term interest rates yet again from 1.
What's interesting is that should the Fed move to a nontraditional approach, a huge responsibility rests on the shoulders of a relatively unknown figure within the Fed system, Dino Kos, executive vice president of the markets group at the New York Fed and manager of the System Open Market Account for the Federal Open Market Committee.
On June 30, as anticipated, the Fed raised its target on the federal funds rate--what banks charge each other overnight--a quarter point to 5% at the end of its two-day Federal Open Market Committee meeting.
So Gonzalez has set out to make the Fed videotape the meetings of the Federal Open Market Committee (FOMC), the Fed's most important policymaking body, and release transcripts of the meetings after 60 days.
In trying to fathom exactly when the Fed switched from the "excess demand" to the "excess supply" rationalization, we took a second look at the published Federal Open Market Committee (FOMC) minutes.

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