alas, the Feds met again. ( part 1)
What is the FOMC, Who is the FOMC, What do they do? Let's understand
Blessed are the young, for they shall inherit the national debt.
- Herbert Hoover
First things first, FOMC stands for Federal Open Market Committee. A quick glance at their website tells us about the fancy work they do, in an arguably, complex way -
“ The term "monetary policy" refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals. The Federal Reserve Act of 1913 gave the Federal Reserve responsibility for setting monetary policy. “
source: https://www.federalreserve.gov/monetarypolicy/fomc.htm
🥸 Let’s dumb this down →
The Federal Open Market Committee, or FOMC, is a group of people who make important decisions about money and how it is used in the United States.
They meet a few times each year to talk about how much money there is in the country and how it is being used. They can make changes to the amount of money available and how much it costs to borrow it, which is called the interest rate. They do this to help make sure that there is enough money to go around and that people can afford to buy things they need, like food and clothes.
The FOMC helps make sure that the economy of the United States is strong + healthy, & is good enough ( sustainable) for everyone.
How?
They do this by making sure there is enough money available for people to use, but not too much, which could lead to problems.
TLDR -
FOMC plays an important role in managing the money and financial system of the United States and helping to ensure the stability and prosperity of the economy.
Understood ☑️, Let’s Dive Deeper →
The Federal Open Market Committee (FOMC) is the main policy-making body of the Federal Reserve System, the central banking system of the United States. The FOMC is responsible for setting monetary policy for the U.S. economy.
Who sits in this meeting?
The FOMC consists of 12 members: the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the other 11 Reserve Bank presidents, who serve one-year terms on a rotating basis. The Chairman of the Board of Governors, currently Jerome Powell, serves as the Chair of the FOMC.
The FOMC meets eight times per year to review economic and financial conditions and to decide on the appropriate stance of monetary policy. The committee can take a number of actions to achieve its policy objectives, including setting the target range for the federal funds rate, which is the interest rate at which banks lend to each other overnight.
The FOMC also has the authority to buy and sell securities in the open market as a way to influence the supply of money and credit in the economy.
Question of the hour, How does FOMC affect the World Economics?!
Simple,
The Federal Open Market Committee (FOMC) of the Federal Reserve System plays a significant role in shaping monetary policy and economic conditions in the United States, which can have important spillover effects on the global economy.
Monetary policy decisions made by the FOMC can affect the value of the U.S. dollar and the level of interest rates in the United States, which can in turn impact financial markets and economic activity around the world.
For example: →FOMC raises interest rates → it can lead to a stronger U.S. dollar → this may discourage foreign investment in the United States → which could have negative consequences for the global economy.
On the other hand, if the FOMC lowers interest rates, it could lead to a weaker U.S. dollar and encourage foreign investment, which could have positive effects on the global economy.
In addition, the state of the U.S. economy can also have important implications for the global economy. The United States is a major economic power (sighs..) and changes in economic conditions in the country can affect the demand for goods and services from other countries and can influence the level of global economic activity.
Overall, the actions of the FOMC can have far-reaching effects on the global economy and can contribute to the stability or instability of financial markets and economic activity around the world.
This concludes the part 1 of the 2 blogs on FOMC. Part 2 comes out tomorrow!
Meanwhile, you gotta do, what you gotta do →