FOMC (The Federal Open Market Committee)
The Federal Open Market Committee (FOMC) is the policy making branch of the Federal Reserve Bank in the United States. It conducts eight meetings per year to analyze the current market and make decisions based on the findings. The decision made by the FOMC will have a direct consequence on the funds held by the Fed, causing ripple effects on the market. The decisions by this committee are eagerly awaited by the financial industry.
The FOMC is comprised of 12 members. Seven of them are appointed by the United States president from the Federal Reserve Bank Board. Another seat goes to the New York Reserve Bank president who has a permanent seat in the committee. The last four seats are rotated among the remaining reserve banks president around the country. Each president will have voting rights for one year before another president takes his place to ensure even representation.
During the meetings, committee members will present their findings about current market situations together with their projection. For example, a member from California might present a study about technology trends while another member might talk about the Mercantile Exchange. All findings will be taken into consideration. The voting members would discuss and make a decision on the federal interest rate and if it is necessary to buy or sell securities to decrease or increase available currency.
The main objective of the FOMC is essentially to sustain a healthy economy with reasonable credit rates and low unemployment rate. The committee has other powers. If inflation is getting to high, committee members may reduce available credit. Decisions made by FOMC members are reached behind closed doors. Aside from the eight scheduled meetings, FOMC can also facilitate emergency meetings on short notice. It can make rapid decisions on short notice to fend off possible instability in the American economy.
Whether FOMC is making the right decisions in the long run by keeping the interest rates at very low levels is a controversial matter. At Sunshine Profits we disagree.Back