Forex4you

Federal open market committee (FOMC)

    Open market operations are the most important tool of monetary policy. Federal Open Market Committee (FOMC) buys and sells federal debt bonds and US Treasury securities.

    The latter are used for federal expenditure financing and are issued in convertible and unconvertible forms.

Convertible securities include:

• treasury bills with a repayment period of 13, 26, 52 weeks and nominal value of 10,000 USD;
• treasury bonds of a nominal value which equals 1,000 USD or exceeds this sum. These bonds may be medium-term as well as long-term.

    FOMC is scheduled to meet 8 times a year. At the meetings such topics as the current economic situation, its possible developments, and the direction of the monetary policy are discussed. At least 2 times a year, the FOMC votes on the long-term strategy concerning the most important indicators of money supply and of public debt.

    At every FOMC meeting the interest rate level is put to a vote. The results of this vote may lead to one of the following decisions: to increase the base point rate, to leave the rate unchanged, or to decrease the rate. The highest increase since 1990 occurred on November 15, 1994 when the rate was increased by 75 base points. The most significant decrease was 50 base points.

    1 base point = 1/100 percentage point.

    The record of the meeting ("FOMC Minutes") is published three weeks after it is held. The Minutes provide a brief overview of the current economic situation, possible means for its development, the interest rate decision, and a general forecast. Annual records are published with a five-year delay.

Federal Open Market Committee (FOMC) Members

    The Committee consists of 7 members of the Federal Reserve Board and 5 Federal Reserve Bank presidents, one of whom is the head of the Federal Reserve Bank of New York. Other presidents who serve one-year terms on a rotating basis are appointed at the first meeting of the year. Non-voting presidents attend meetings and take part in the discussion of economic and political issues.

    The voting bank presidents are elected at the FOMC meetings in the following groups:

• Boston, Philadelphia, Richmond;
• Cleveland, Chicago;
• Atlanta, Saint Louis, Dallas;
• Minneapolis, Kansas, San Francisco.

    The chairman of the Board of Governors is traditionally elected as the chairman of the Committee, while the chairman of the Federal Reserve Bank of New York is elected as his deputy.

Federal Open Market Committee Members (2007):

• Ben S. Bernanke, Board of Governors, Chairman;
• Timothy F. Geithner, Federal Reserve Bank of New York, Vice Chairman;
• Frederic S. Mishkin, Board of Governors;
• Donald L. Kohn, Board of Governors;
• Randall S. Kroszner, Board of Governors;
• Kevin M. Warsh, Board of Governors;
• Thomas M. Hoenig, Federal Reserve Bank of Kansas;
• Cathy E. Minehan, Federal Reserve Bank of Boston;
• Michael H. Moskow, Federal Reserve Bank of Chicago;
• William Poole, Federal Reserve Bank of Saint Louis.

    Alternative FOMC Members

• Richard W. Fisher, Federal Reserve Bank of Dallas;
• Sandra Pianalto, Federal Reserve Bank of Cleveland;
• Charles I. Plosser, Federal Reserve Bank of Philadelphia;
• Gary H. Stern, Federal Reserve Bank of Minneapolis;
• Christine M. Cumming, First Vice President of the Federal Reserve Bank of New York.