The Federal Open Market Committee (FOMC)

Open market operations are the most important instrument of money and credit policy. The Federal Open Market Committee (FOMC) deals with buying and selling of United States Treasury securities.

Treasury securities are the debt financing instruments of the United States Federal government they are often referred to simply as Treasuries and are presented as marketable securities and non-marketable securities. Marketable securities include:

  • Treasury bills that are commonly issued with maturity dates of 4, 13, 26 and 52 weeks with $10.000 nominal and sold by single-price auctions held weekly
  • Treasury bonds that are medium or long-term securities with nominal more than $1.000

The FOMC must meet at least four times each year. Eight regularly scheduled meetings have been held each year at intervals of five to eight weeks. At each regularly scheduled meeting, the Committee votes on the policy to be carried out during the interval between meetings. Therefore they are always proactive on their policies.

Voting concerning volume of the rate is carried out on each meeting. As a result of the voting there can be made one of the following decisions: increase the rate of basing-point pricing, leave it as it is, decrease the rate. The biggest increase since 1990 happened on the 15th of November 1994: the rate was increased for 75 basing-points and the biggest decrease was for 50 basing-points.

1 basing-point equals 1/100 percentage-point.

Three weeks after the meeting its reports are published. They contain short descriptions of economic situation, it possible development, rate of interest decision and the general forecast. Transcript of meetings for a year is published with 5 year delay.

Members of the FOMC

The Committee consists of the seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank presidents. The Federal Reserve Bank of New York president always sits on the Committee, and the other presidents serve one-year terms on a rotating basis. All of the Reserve Bank presidents, even those who are not currently voting members of the FOMC, attend Committee meetings, participate in discussions, and contribute to the Committee’s assessment of the economy and policy options. The Committee meets eight times a year, approximately once every six weeks.

The rotating seats are filled from the following four groups of banks, one bank president from each group:
  • Boston, Philadelphia, and Richmond
  • Cleveland and Chicago
  • Atlanta, St. Louis, and Dallas
  • Minneapolis, Kansas City, and San Francisco