Federal Open Market Committee (FOMC)

The Federal Open Market Committee (FOMC) is a key component of the Federal Reserve System responsible for decisions related to interest rates and the growth of the U.S. money supply.

The Federal Reserve System controls the three tools of monetary policy: open market operations, discount rate and reserve requirements, and FOMC is responsible for the first one.

Open market operations involve the buying and selling of government securities in the open market in order to raise or lower interest rates. These operations are the primary tool for adjusting the Federal Funds Rate and managing liquidity in the financial system. They influence short-term interest rates, the money supply, and overall economic conditions.

FOMC is crucial in trading and investment decisions due to its significant influence on U.S. monetary policy and financial markets. The FOMC sets key interest rates, particularly the Federal Funds Rate, which impacts borrowing costs, economic activity, and inflation.

The FOMC holds eight regularly scheduled meetings per year. It's announcements can lead to immediate market volatility, resulting in significant price movements across asset classes.