FOMC Meeting

Who: Federal Open Market Committee

When: Twice per quarter

What: The Federal Open Market Committee, consisting of a twelve-member committee made up of seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and, on a rotating basis, the presidents of four other Reserve Banks, meets to set Federal Reserve guidelines regarding the purchase and sale of government securities in the open market as a means of influencing the volume of bank credit and money in the economy; also establishes policy relating to system operations in foreign exchange markets. FOMC actions can have a huge influence on interest rates here and abroad, the rate of economic growth, the cost of borrowing for businesses and consumers, and the direction of stock and bond markets.

Why: At the FOMC meeting, the Fed decides on their interest rate policy. The Fed funds rate, set by the Fed, is the lending rate banks charge each other for the use of overnight funds and is seen as a benchmark for all other rates. The level of interest rates affects the economy; higher rates tend to slow activity, while lower rates stimulate activity that expands into all sectors of the economy. The Fed funds rate has a more direct influence on shorter term interest rates than on longer term interest rates.