Eight times a year the committee meets:the Fed's rate call moves the streets.
The Federal Open Market Committee: the committee of the US Federal Reserve that decides monetary policy, chiefly by setting a target range for the federal funds rate.
Its scheduled meetings and statements are closely watched in currency markets.
In plain words
The Federal Open Market Committee, or FOMC, is the body within the US Federal Reserve that decides monetary policy, chiefly the target range for the federal funds rate, the rate at which banks lend to each other overnight. It holds eight scheduled meetings a year and publishes a statement after each one.
See it move
Meeting, then Statement
Why it matters
The US dollar is on one side of most currency trading, so the committee’s decisions and wording move many markets at once. Prices often move sharply in the minutes around a statement, and spreads can widen.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
Before a meeting the target range is 4.00% to 4.25%, and the committee lowers it by 0.25 percentage points (invented figures).
- 1Old range4.00% to 4.25%
- 2New lower bound = 4.00% − 0.25% = 3.75%
- 3New upper bound = 4.25% − 0.25% = 4.00%
The new target range is 3.75% to 4.00%; how markets respond depends on whether the cut was expected.
A common mistake
The committee does not set the rates that households and firms pay. It sets a target range for one overnight rate between banks, and other interest rates respond to that.
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Educational information, not investment advice or a recommendation to trade.