FOMC
The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve System that is responsible for setting the nation’s monetary policy. The FOMC is composed of twelve members: the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis. The FOMC meets eight times a year to discuss the economic outlook and to decide on the appropriate stance of monetary policy.
History of FOMC
The FOMC was established by the Federal Reserve Act of 1913. The FOMC is responsible for setting the target for the federal funds rate, which is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. The FOMC also sets the discount rate, which is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility.
The FOMC also sets reserve requirements, which are the amount of funds that depository institutions must hold in reserve against specified deposit liabilities. The FOMC also has the authority to conduct open market operations, which are the buying and selling of government securities in the open market in order to influence the money supply and the level of short-term interest rates.
Comparison Table
| FOMC | Federal Funds Rate | Discount Rate | Reserve Requirements |
|---|---|---|---|
| Established by Federal Reserve Act of 1913 | Target set by FOMC | Interest rate charged by FOMC | Amount of funds held by FOMC |
Summary
The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve System that is responsible for setting the nation’s monetary policy. The FOMC is composed of twelve members and meets eight times a year to discuss the economic outlook and to decide on the appropriate stance of monetary policy. The FOMC is responsible for setting the target for the federal funds rate, the discount rate, and the reserve requirements. For more information about the FOMC, visit the Federal Reserve System’s website.
See Also
- Federal Reserve System
- Federal Funds Rate
- Discount Rate
- Reserve Requirements
- Open Market Operations
- Monetary Policy
- Interest Rates
- Money Supply
- Economic Outlook
- Federal Reserve Act of 1913
