What is the federal open market committee | FOMC: Definition

The US Federal Reserve, is the most important central bank in the whole world. Remember that all the other central banks across the Western world and the world in fact are watching the Federal Reserve before making their own policy decisions. So all eyes really are on the Fed and remember with the US dollar being the most traded currency in the world and it comprises of around 70 percent of all transactions on a given a debt on a given day. It’s no surprise that the Federal Reserve is really closely watched because it’s just such an influential central bank in the Federal Reserve. There’s a group called the Federal Open Market Committee. You’ll hear them referred to as the FOMC. This group consists of seven governors from the Federal Reserve Board and five presidents from the twelve District Reserve banks. They aim to get long-term price stability and long term growth and they meet to discuss monetary policy and to change it about eight times a year. Again like most central banks they have a website and you can go to the central bank’s website here, federalreserve.gov and you can see the stated aim of the Federal Reserve. The central bank of the United States provides the nation with a safe flexible and stable monetary and financial system. If you go to news and events and you go to press releases and then, if you click, click the monetary policy tab, you then see the monetary policy meetings and the rate statements. So that was the last rate statement on the 13th of June. You just click on that and you can read the rate statement that was made and they you can see that, they raised the fund rate to one 3/4 to 2%. So there was a rate increase that was an expected event. Another useful tool when considering the Federal Reserve interest rates, is something called the countdown to FOMC. It’s the CME groups Fed watch tool and you can access it here using this website. If you just googled CME Group trading interest rates, okay. You know FOMC something like that you should hit it and it looks looks like this and this tool. It’s got a user guide a video demo, exactly. How you can use it but essentially what it does it. It’s very useful because it lets you know what the probability of the rates being increased. So the current target rate is 1.75 to 2%. We’ve got that there and you can see that, that’s what it’s expected to remain out in August. Now if you look in September, just click on September, what they’re expecting? Here is they’re expecting, there’s a 71 percent chance of a target rate to be increased to 2 to 2.25 percent. Sso you can see that an interest rate is expected for September and then you can go from November and you can see. You know 5, there’s a 5.1 cent, probability that’s a another interest rate rise and it’s almost you know 40%, 40% whether it’s increased a further 2.25 to 250 or remains at that 2 to 2.25. So you can see by looking at this tool what the probability and expectations are for the interest rates and that’s a very helpful tool as a trader because if some information comes out that radically affects those expectations. You’re gonna see the US dollar having its value. It’s going to be changed and affected by these expectations. Okay, that’s the Federal Reserve, the most popular and most closely follow central bank in the whole world and that is the FOMC CME Fed watched all worth having on your radar and looking at when you’re considering the Federal Reserve.