Federal Open Market Committee Meetings
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Historical FOMC Range
What You Should Know
- The FOMC usually meets eight times a year to decide US monetary policy including the target Fed Funds Rate.
- Their goal is maximum sustainable employment, stable prices, and moderate long-term interest rates.
- The FOMC executes US monetary policy through open market operations, which is buying or selling government securities.
- The FOMC consists of seven Board of Governors members and twelve regional Federal Reserve Bank presidents (five of whom vote at any time).
What is a FOMC Meeting?
The Federal Open Market Committee (FOMC) is the US Federal Reserve's primary monetary policymaking body. Their goal is to ensure economic price stability and maximum employment with moderate long-term interest rates. They achieve this by influencing the rate of interest in the economy through open market operations.
Lower interest rates encourage economic growth by decreasing savings while incentivizing borrowing. This results in more consumption which fuels economic growth and employment. However, prolonged borrowing increases the money supply, resulting in inflation. Inflation occurs if too much money is chasing a few goods - which causes widespread price increases. This balance between inflation and unemployment is discussed in FOMC meetings.
The FOMC holds eight regularly scheduled meetings per year. At these meetings, the committee assesses economic conditions and decides whether or not to modify the amount of money in circulation. Modifications to the short term interest rate are known as open market operations. Whereas modifications to the medium and longer-term interest rates are referred to as quantitative easing or quantitative tightening.
The FOMC also conducts informational meetings, which are not focused on monetary policy. Instead, these meetings allow members of the Board of Governors and Federal Reserve Banks to share their perspectives on the economy with academic economists, representatives from other government agencies, and other guests.
What Happens at a FOMC Meeting?
At each regularly scheduled meeting, the committee votes on whether or not to modify the interest rate and influence the money supply. As previously mentioned, the money supply is influenced by open market operations, which determines the federal funds rate. The current target range is 2.25% - 2.50%. You can jump to our section on monetary policy to learn more about how open market operations affect reserves' supply.
The FOMC also discusses the current state of the economy and decides on the appropriate monetary policy to ensure price stability and maximum employment. The committee may also vote to modify the size or composition of the Federal Reserve’s balance sheet.
The meetings typically last two days, with the first day devoted to informational presentations by Federal Reserve Bank staff and academic economists. The second day is when the committee members vote on monetary policy decisions.
After each meeting, the FOMC releases a statement summarizing its economic outlook and decision regarding monetary policy. The minutes (a follow-up document to the meeting) are released three weeks after the meeting.
Who Attends FOMC Meetings?
The FOMC consists of 12 voting members:
- Seven members of the Board of Governors
- The President of the Federal Reserve Bank of New York
- Four of the 11 remaining presidents of the other Federal Reserve Banks
The President of the Federal Reserve Bank of New York is a permanent member, while the other 11 presidents serve on a rotating basis.
The FOMC also has several non-voting members, including:
- The secretary and treasurer of the US Department of the Treasury
- The director of the US Mint
- The chair of the Board of Governors' Division of Banking Supervision and Regulation
- The chair of the Board of Governors' consumer advisory council
The Board of Governors
The Board of Governors is the main governing body of the Federal Reserve System. They are responsible for setting monetary policy, regulating banks, and supervising the activities of the Federal Reserve Banks.
The Board is a federal agency with seven appointed members typically serving 14-year terms. After the term expires, the members can't be re-appointed. However, sometimes, a member can serve a longer term if they finished another member's term who left early. In this scenario, the member will finish someone else's term and then can be reappointed for their individual 14-year term.
The Chair and vice-chair serve 4-year terms and may be re-appointed. The President of the United States nominates the Board of Governors members, and the Senate must confirm them. Of the seven members, no more than three can belong to the same political party.
The current Chair of the Board of Governors is Jerome Powell, who was appointed by President Trump in 2018. He was re-appointed in May 2022. Mr. Powell's terms are set to expire on May 15, 2026, as Chair, and on January 31, 2028, as a Governor. Before his position on the Board, Mr. Powell served as Under Secretary of the U.S. Department of the Treasury under President George H.W. Bush. He was also a partner at The Carlyle Group from 1997 through 2005.
The current Vice Chair is Lael Brainard, appointed to the Board by President Obama in 2014. In May 2022, Dr. Brainard was appointed vice chair for a four-year term. Before her appointment, she served as Under Secretary of the U.S. Treasury for International Affairs from 2010 to 2013. She also served as a member of the President's Council of Economic Advisers.
The five remaining members of the Board of Governors are:
|Name||Political Party||Term Began||Term Ending|
|Michael Barr*||Democrat||July 19, 2022||January 31, 2032|
|Michelle Bowman||Republican||Reappointed February 1, 2020||January 31, 2034|
|Chris Waller*||Republican||December 18, 2020||January 31, 2030|
|Lisa Cook*||Democrat||May 23, 2022||January 31, 2024|
|Philip Jefferson||Democrat||May 23, 2022||January 31, 2036|
*Finishing an unexpired term vacated by a prior member.
The 12 Federal Reserve Bank Presidents
There are 12 Federal Reserve Banks located in major cities across the US. Each bank is responsible for supervising commercial banks and providing financial services to its district. The President of the Federal Reserve Bank of New York is given a constant FOMC seat, while the remaining four FOMC seats are rotated by the 11 other Federal Reserve Bank Presidents. The rotation works on a three-year cycle. However, Cleveland and Chicago rotate on a two-year cycle. The Federal Reserve Banks includes:
- New York Federal Reserve Bank
- Boston Federal Reserve Bank
- Philadelphia Federal Reserve Bank
- Cleveland Federal Reserve Bank
- Richmond Federal Reserve Bank
- Atlanta Federal Reserve Bank
- Chicago Federal Reserve Bank
- St. Louis Federal Reserve Bank
- Minneapolis Federal Reserve Bank
- Kansas City Federal Reserve Bank
- Dallas Federal Reserve Bank
- San Francisco Federal Reserve Bank
The role of each President is to oversee the operation of their Federal Reserve Bank and take part in the formulation of U.S. monetary policy. The President is also responsible for maintaining relationships with other reserve banks, commercial banks, and businesses in their district.
Who Chairs FOMC Meetings?
The FOMC is chaired by the current Chair of the Board of Governors, Jerome Powell. The vice chair is Lael Brainard. The Chair and Vice Chair are appointed by the President of the United States, subject to confirmation by the US Senate. They serve four-year terms.
When Do FOMC Meetings Take Place?
FOMC meetings are typically held eight times per year, typically in the following months:
However, the number of meetings can vary from year to year. The FOMC also holds informational meetings throughout the year.
Monetary Policy Explained
Monetary policy is the actions a central bank, such as the Federal Reserve, takes to influence the supply of money and credit in the economy. The 1913 Federal Reserve act sets the goals of monetary policy in the U.S. They are to promote maximum employment, stable prices, and moderate long-term interest rates in the US economy.
Other central banks such as the Bank of Canada and the European Central Bank have a single mandate for achieving price stability. Monetary policy begins with the FOMC setting the target rate. The Federal Reserve then uses several rate-targeting tools, including the federal funds rate and open market operations.
Target Fed Funds Rate
The Federal Open Market Committee determines the target rate. It is an interest rate range at which banks lend to each other. The target rate is intended to influence different short-term interest rates, such as the prime rate, which is the rate banks charge their best customers. The prime rate is also a reference point for different loan types. For example, a bridge loan usually has an interest rate that is 2% above the prime rate.
A higher fed funds rate increases the cost of borrowing, such as mortgage rates. As a result, businesses and consumers borrow and spend less. This slows the economy and inflation. A lower fed funds rate does the opposite. After the target rate has been set, the Federal Reserve Bank of New York then uses open market operations to reach the target rate.
Open Market Operations
Open market operations are the Federal Reserve buying and selling government securities in the open market. The purpose of open market operations is to influence the federal funds rate and bank reserve levels. After the Fed sets the target rate, they use open market operations to reach the range. Usually, the Federal Reserve buys low-risk securities such as 1-year government bonds.
When the Federal Reserve buys securities, it pays for them with newly printed money. This increases the money supply and puts downward pressure on interest rates. When the Federal Reserve sells securities, it removes money from circulation. This decreases the money supply and puts upward pressure on interest rates.
As a result, the target fed funds rate is achieved by buying or selling securities in the open market.
The Federal Reserve can influence the money supply by changing the reserve requirement. The reserve requirement is the percentage of deposits that banks must hold in reserve. The current reserve requirement is 10%. This means that for every $100 a bank has in deposits; it can lend out $90. A higher reserve requirement means a bank must retain more deposits with less money to lend.
An increase in the reserve requirement decreases the amount of money available for lending. This leads to higher interest rates and reduced economic growth. A decrease in the reserve requirement has the opposite effect.
The Fed Funds Rate is the inter-bank lending rate, while the discount rate is the Federal Reserve lending rate. The discount rate is decided by the Board of Governors' seven members, not the entire FOMC. The discount rate is typically higher than the target federal funds rate. It effectively acts as a maximum interest rate ceiling that banks can charge each other.
The discount rate is the interest rate banks get from the Federal Reserve. The purpose of the discount rate is to influence short-term interest rates.
When the discount rate is high, it becomes more expensive for banks to borrow from the Fed. This puts upward pressure on interest rates and slows economic growth. As a result, banks are less likely to borrow and lend.
When the discount rate is low, it becomes cheaper for banks to borrow from the Fed. This puts downward pressure on interest rates and speeds up economic growth. Banks are more likely to borrow and lend.
Federal Reserve Balance Sheet
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The Federal Reserve balance sheet contains all the assets and liabilities the Federal Reserve owns. The two main items on the balance sheet are treasuries and federal agency debt securities. The balance sheet also includes bank loans, foreign currency holdings, and gold reserves.
The balance sheet increases while the Federal Reserve decreases interest rates through quantitative easing. This is because the Federal Reserve buys assets while increasing the money supply. The balance sheet shrinks when the Federal Reserve raises interest rates because the Federal Reserve sells assets and decreases the money supply.
The Federal Reserve balance sheet size has increased significantly since the 2008 financial crisis. The Federal Reserve has been using quantitative easing to raise the money supply and lower interest rates.