FACT WIKI · Institution
Federal Open Market Committee
Federal Open Market Committee
The Federal Open Market Committee (FOMC) is the Federal Reserve committee responsible for the central bank's open market operations.
Roles and functions
The FOMC holds eight regularly scheduled meetings each year. At these meetings, it reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses risks to its long-run goals of price stability and sustainable economic growth.
How it works
The FOMC has twelve voting positions: the seven members of the Federal Reserve Board of Governors, the president of the Federal Reserve Bank of New York and four other Reserve Bank presidents serving one-year terms on a rotating basis. Each rotating seat comes from a different group of Reserve Banks: Boston, Philadelphia and Richmond; Cleveland and Chicago; Atlanta, St. Louis and Dallas; and Minneapolis, Kansas City and San Francisco.
History and changes
The Banking Act of 1935 revised the FOMC's structure to include seven governors and five Reserve Bank presidents. Under that arrangement, Reserve Bank directors selected one president from each of five groups of Banks; those historical groups differed from the rotation groups described in the Federal Reserve's membership overview.
In 1955, under Federal Reserve Chairman William McChesney Martin Jr., the FOMC's executive committee was abolished and its duties passed to the full FOMC.
The Banking Act of 1933 created the first version of the FOMC, with all twelve Reserve Banks as members. The Board of Governors received veto authority over its decisions, although policy remained primarily the responsibility of the Reserve Banks. This version of the committee first met on July 20, 1933.
Scope and limitations
Reserve Bank presidents without a vote still attend FOMC meetings, participate in discussions and contribute to the committee's assessment of the economy and policy options. Participation in deliberations therefore extends beyond the presidents holding voting seats.
Background and related concepts
The FOMC's interest-rate decisions attract attention from the public and market participants because they eventually affect short- and long-term interest rates and the availability of money and credit.
References
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