FOMC refers to the Federal Open Market Committee which is a part of the U.S Federal Reserve or Fed and this is the central bank of the United States of America. Among them are the monetary stock of the country together with the general economy and they are controlled by FOMC. The main objective of it is to ensure that the economy remains stable, which implies that the general price level should not go very high (inflation) and that jobs should be availed to people whenever they are needed.

Decisions by FOMC therefore determine how much things cost, how much one is likely to earn from savings, and how easy or difficult it is to secure credit. For this reason, the FOMC has a major influence on major economy and their decisions affect several other nations across the globe.

Composition of the FOMC

Currently, the FOMC has 12 voting members of which seven are members of the Board of Governors and the remaining five are presidents of the regional Federal Reserve banks. Of them seven are drawn from the Board of Governors of the Federal Reserve based in Washington D.C while the remaining five are the presidents of different Federal Reserve Banks in the region; the president of the Federal Reserve Bank of New York exercises this casting vote. The regional banks are from various locations and thus introduced to the meeting ideas from their regions.

For the FOMC, it is headed by the Chairperson of the Board of Governors normally referred to as the Fed’s Chairperson. The committee Assembles approximately eight times annually to deliberate about how the economy is doing and or what the economy has to do to balance it.

Main Functions of the FOMC

It is notable to mention that the FOMC’s main responsibilities include setting the country’s monetary policy.
Monetary policy is how the government controls money and interest rates. The FOMC decides if interest rates should go up, down, or stay the same. Higher rates make borrowing money more expensive and saving money more rewarding. The FOMC changes rates to control inflation (rising prices) and unemployment (people without jobs). If the economy is growing too fast and prices are rising a lot, they might raise rates. If the economy is struggling, they might lower rates to encourage spending.

Tools and Methods

For this purpose, the FOMC has several tools at its command and by which it can perform its roles. The main used tool is called open market operations. When the U.S. Central Bank buys or sells government bonds, it affects how much money is in the economy and can lower interest rates. If they sell bonds, they withdraw money from circulation and this implies raising the interest rates.

The federal funds rate is the cost for banks to borrow money for one day. If it raises this rate, borrowing becomes expensive for banks, so they charge more to their customers.

Using these tools, the FOMC makes decisions that elicit long-lasting impacts on the overall economy. If the interest rates rise, then it is costly to borrow and therefore tends to depress the expenditure. When it comes to rates of percentage, when these are lowered, then it is easier for people to borrow and thus they spend.

Impact on Forex and Global Markets

FOMC decision can also exert its influence on the global economy trading platform, particularly in the foreign exchange (forex) market. As a result of the above, the value of the U.S. dollar is subscribed to FOMC policies. When the FOMC raises interest rates, the dollar usually becomes stronger because it’s more appealing to investors.

The federal funds rate is the cost for banks to borrow money for one day. If the FOMC raises this rate, borrowing becomes expensive for banks, so they charge more to their customers. Similarly, a depreciation of the dollar makes U. S. exports cheaper for other countries to purchase leading to export increases.

Why the FOMC Matters to You

Even though FOMC may appear to be quite remote, its decisions may influence the everyday experience of people significantly. If the FOMC raises interest rates, loans and mortgages become more expensive. If rates go down, loans are cheaper, and savings earn less interest. FOMC decisions also affect the economy and can influence jobs and prices for things. Understanding the FOMC helps you see how money and the economy work.