FOMC (Federal Open Market Committee)
FOMC ( Federal Open Market Committee) is policy making branch of Federal Reserve Bank of US. Usually this team meets 8 times in a year to analyse US economy, US Job markets and Capital markets and make decision based on their analysis. This decision is direct responsible of interest rate in United States and it impacts almost everyone in United States when interest rate decrease or increase due to FOMC’s analysis.
This Federal team has total twelve members.
- One reserve seat is for New York Reserve Bank president, Four seats keep rotating among other Reserve Banks presidents.
- Seven members are appointed by United States President. Each president has one voting right.
- All members of Fomc team meets on one data and present their findings, If president is from Texas, He/She may show trend about meat exports or oil industry.
- A Californian president might show and spill some beans on Tech industry. New York president would often focus on capital markets and spending habits.
- All analysis by 12 members would taken into consideration and decide on further interest rate or security buying.
FOMC impact on dollar is very significant since it decides on interest rate and decides the fate of consumer’s EMI. Usually a dovish overview of economy and softer interest rate boosts US Dollar and supports Equity markets. A hawkish overview of economy and higher Interest rate decrease borrowing power of consumer hence negative for dollar and economies.
FOMC decision on US economy and Interest rate impacts Gold too. Gold is a safe asset haven. When committee sounds hawkish and increase interest rate which usually means limiting consumer power and limited borrowing for companies results in higher gold price.
Gold relation with dovish interest rate is negative. When interest rate decrease consumer borrowing and company’s borrowing increase which results in negative gold prices.
Hawkish and Dovish are not stable terms so one needs to read full statement before taking any trade on just headline of Hawkish or Dovish. Sometime even a hawkish tone may sink gold and a dovish fed could drive gold higher. Read full analysis before taking this term into trade consideration. We always recommend stop loss in every trade. Read why you should use stop loss in every trade here.
- Main objective of Federal committee is to achieve healthier US economy with lower unemployment numbers.
- FOMC has every weapon to fight inflation and low unemployment numbers.
- They may decide to hike or reduce interest rate.
- They may decide to buy securities to stabilize capital and bond markets.
Here are main terms of FOMC which we usually use while updating on Federal Committee
Fed Meeting Minutes
Fed is US Federal System, It is the central bank of United states. It is founded in 1913 and since then it is responsible for safer monetary policies. Every month after Federal Committee meeting we gets Fed Minutes which usually release after 2-3 weeks of actual meeting. It gives insight view of FOMC outlook on economy and interest rate.
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