FOMC (Federal Open Market Committee)

What does FOMC stand for?

FOMC stands for Federal Open Market Committee, the monetary policy committee of the US central bank, the Federal Reserve (Fed). It decides on US interest rate policy – above all the target range for the federal funds rate, the rate at which banks lend reserves to each other overnight – and on the Fed's purchases and sales of securities, known as open market operations.

Members and meetings

The committee has 12 voting members: the seven members of the Fed's Board of Governors, the president of the Federal Reserve Bank of New York and four of the other eleven Reserve Bank presidents, who vote on a one-year rotating basis. All Reserve Bank presidents take part in the discussions. By tradition, the Fed Chair also chairs the FOMC.

The FOMC holds eight regularly scheduled meetings a year, roughly every six weeks, and can meet in between if necessary. The meetings are not public. About two weeks before each one, the Fed publishes the Beige Book. After each meeting, the committee releases a statement with its decision, followed by the Chair's press conference; the minutes are published three weeks later. Four times a year, participants' economic projections are also released, including the "dot plot" of their interest rate expectations.

Why the FOMC matters for traders

FOMC decisions, statements and minutes are among the most important economic news, and every trader should know the meeting dates. As the US dollar is the world's leading reserve and trading currency, a change in Fed policy – or merely in its tone – can move currency pairs, gold, bonds and stock indices worldwide. A shift towards higher interest rates tends to support the dollar, while signs of rate cuts tend to weigh on it. Prices often react within seconds, and spreads can widen around the announcement.