The Federal Open Market Committee (FOMC) is the monetary policy-making body of the Federal Reserve System. It consists of 12 members: the 7 members of the Board of Governors and 5 of the 12 regional Federal Reserve Bank presidents (rotating annually, except for the New York Fed president who is a permanent member).
The FOMC meets eight times per year (roughly every six weeks) to review economic conditions and set the target range for the federal funds rate. After each meeting, the Committee releases:
The FOMC's decisions are the single most important driver of the short end of the yield curve. The Fed page on this site charts every FOMC rate decision with the yield curve context at each meeting, showing how the curve shape evolves through tightening and easing cycles.
Between meetings, the fed funds futures market continuously prices the probability of upcoming rate changes, effectively creating a real-time poll of market expectations about FOMC actions.
The headline is the rate, but the Committee decides several things at each meeting, and the market reads all of them.
The target range. The Committee sets a range for the federal funds rate rather than a single number. It does not set the rate directly. It sets administered rates that steer where overnight lending clears inside that range.
The balance sheet. Decisions on reinvestment and runoff are made at the same meetings. These move the long end through the term premium rather than the short end through expectations.
The language. The statement is revised sentence by sentence, and a changed adjective is treated as a signal. Markets compare each statement to the previous one word for word, because the Committee edits deliberately.
The projections. Four times a year, each participant submits their own forecast for growth, unemployment, inflation, and the appropriate policy rate. These are individual views, not a Committee decision, and they are published without names attached.
The distinction between the last two matters. The statement is agreed collectively and carries the Committee's intent. The projections are a scatter of individual opinions, and reading them as a plan overstates their authority.
Meeting day follows a fixed sequence, and each stage can move the market on its own.
The statement is released at 2:00 PM Eastern time. The press conference begins thirty minutes later. The projections, when they are produced, are published with the statement.
That thirty minute gap is the reason a meeting often produces two separate market moves. The first reaction prices the decision and the statement. The second reaction prices what the Chair says about it, and the two can point in opposite directions. A decision read as hawkish can be softened within the hour, or the reverse.
Minutes follow three weeks later and contain the argument rather than the conclusion. They reveal how much disagreement sat behind a unanimous vote, which is useful for judging how easily the Committee might change course.
The market does not wait for the meeting. It prices the probability of each outcome continuously in the futures market, which is why the reaction on the day reflects only the surprise.
This produces a counterintuitive pattern. A rate increase that was fully expected can leave yields unchanged or lower. The increase was already in the price, so the only new information is whatever the statement and the press conference add about what comes next.
The effect is strongest at the front of the curve, which is nearly an average of expected policy over the next year or two. It fades along the curve. A 10 Yr yield contains ten years of expectations, so a single meeting rarely moves it much unless the Committee changes the market's view of the destination rather than the path.
The Fed page on this site pairs each decision with the curve on that date, which shows how far a given meeting actually moved each tenor.
Twelve members vote. Seven are the members of the Board of Governors. The president of the Federal Reserve Bank of New York holds a permanent voting seat. The remaining four seats rotate annually among the other eleven regional Reserve Bank presidents. All twelve regional presidents attend and participate in the discussion whether or not they hold a vote that year.
No. The federal funds rate is the rate at which banks lend reserves to each other overnight, and it is set by those transactions. The Committee sets a target range and uses administered rates, principally the rate paid on reserve balances, to keep actual trading inside that range. The published effective rate is a volume weighted median of real transactions.
Because it is the only quantified view of where participants think rates should go. The Committee is explicit that the projections are conditional and individual, and participants revise them freely between meetings. Markets still watch them, because a shift in the median dot is the clearest available evidence that the Committee's collective thinking has changed.