Key takeaways

The Federal Open Market Committee (FOMC) is part of the Federal Reserve System of the USA and is responsible for conducting open market operations.

The Federal Open Market Committee holds 8 meetings in Washington every year, with the meeting results typically being the focus of Wall Street's attention.

The Federal Open Market Committee is composed of 7 members of the Federal Reserve Board and 5 presidents of Federal Reserve Banks.

Concept Explanation

The Federal Open Market Committee (FOMC) is part of the Federal Reserve System of the USA and is responsible for conducting open market operations.

The FOMC holds 8 meetings in Washington every year, but in case of emergencies, they can also convene ad hoc meetings.

During the meetings, the FOMC discusses the current economic developments and forecasts for the economic outlook. All participants - 7 members of the Federal Reserve Board and 12 Federal Reserve Bank presidents - share their views on the national economic situation and discuss which monetary policy is most suitable for the current economic conditions. Finally, FOMC members with voting rights vote on the final outcome.

The FOMC meeting is held privately, therefore it receives close attention and speculation from Wall Street. The stock market usually reacts strongly to changes in monetary policy. In recent years, the Fed has publicly released the FOMC meeting minutes after each meeting.

Federal Open Market Committee members

The Federal Open Market Committee (FOMC) consists of 12 members - 7 members of the Federal Reserve Board and the President of the New York Federal Reserve Bank; the remaining 4 rotating seats are selected from the remaining 11 Federal Reserve Bank Presidents, with a one-year term of rotation.

The 11 Federal Reserve Banks are divided into 4 groups - Boston, Philadelphia, and Richmond; Cleveland and Chicago; Atlanta, St. Louis, and Dallas; Minneapolis, Kansas City, and San Francisco - each group takes turns selecting a Bank President to enter the rotating seat.

Federal Reserve Bank Presidents without voting rights can still attend FOMC meetings, participate in discussions, contribute viewpoints, and provide references for the final monetary policy decisions.

Committee members are generally classified into three types: hawks who support tightening monetary policy, doves who support stimulus plans, and moderates / centrists who fall in between the two. Generally, the Chair of the Federal Open Market Committee is also the Chair of the Federal Reserve Board.