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.