FOMC Meeting Announcement
Definition
The Federal Open Market Committee consists of the seven Governors of the Federal Reserve Board and five Federal Reserve Bank presidents. The FOMC meets eight times a year in order to determine the near-term direction of monetary policy. Changes in monetary policy are now announced immediately after FOMC meetings.
How This Affects Us
These announcements are extremely important to investors and traders. The Federal Reserve System is the quasi-governmental/quasi-private central banking system of the United States. Their job is to maintain a strong financial system promoting a stable economy. There are 12 regional Federal Reserve banks throughout the country. Essentially they act as a bank to the banks. Their goal is to provide the nation with a secure financial system. The Federal Reserves effect on interest rates and money supply is most important for traders and investors.
The Fed’s main stated goal is to prevent inflation from overtaking the economy. Inflation is a persistent rise in the general price level, as measured against a standard level of purchasing power. This happens when the economy grows too fast. If the economy grows too slow we may see a recession.
The Fed controls the pace of the economy through interest rates and money supply. When we have higher interest rates, business growth and consumer spending slow down. This happens because it is more expensive to borrow money. If the economy slows too much, the fed will lower interest rates. This makes it less expensive to borrow money and promotes businesses to expand and consumers to spend.
The Fed is an extremely important and influential part of the U.S. economy. It is important to pay attention to when they meet and their decisions. Knowing which way the interest rates are heading can put you a step ahead in the market. Study the Federal Reserve and familiarize yourself with all the ways they affect our economy.