Federal Open Market Committee
The FOMC is the body of the Federal Reserve System that sets national monetary policy. The FOMC makes all decisions regarding the conduct of open market operations, which affect the federal funds rate (the rate at which depository institutions lend to each other), the size and composition of the Federal Reserve’s asset holdings, and communications with the public about the likely future course of monetary policy. Congress enacted legislation that created the FOMC as part of the Federal Reserve System in 1933 and 1935.
The FOMC consists of 12 voting members--the seven members of the Board of Governors; the president of the Federal Reserve Bank of New York; and 4 of the remaining 11 Reserve Bank presidents, who serve one-year terms on a rotating basis.
All 12 of the Reserve Bank presidents attend FOMC meetings and participate in FOMC discussions, but only the presidents who are Committee members at the time may vote on policy decisions.
By law, the FOMC determines its own internal organization and, by tradition, the FOMC elects the Chair of the Board of Governors as its chair and the president of the Federal Reserve Bank of New York as its vice chair. FOMC meetings typically are held eight times each year in Washington, D.C., and at other times as needed.
The FOMC is charged with overseeing “open market operations,” the principal tool by which the Federal Reserve executes U.S. monetary policy. These operations affect the federal funds rate, which in turn influence overall monetary and credit conditions, aggregate demand, and the entire economy. The FOMC also directs operations undertaken by the Federal Reserve in foreign exchange markets and, in recent years, has authorized currency swap programs with foreign central banks.