The FOMC (Federal Open Market Committee) is the US Federal Reserve's body in charge of US monetary policy. Composed of 12 members (7 Fed governors + 5 rotating regional Fed presidents), it meets 8 times per year per a pre-published schedule.
FOMC decisions:
- Federal Funds Rate: benchmark policy rate — affects all other global rates by contagion
- Quantitative Tightening / Easing: buying or selling bonds to expand/shrink the money supply
- Forward Guidance: communication on future intentions (often as impactful as the decision itself)
FOMC meeting format:
- 2:00 PM ET: Statement published — official rate decision + Summary of Economic Projections (SEP) every 3 months including the famous "dot plot"
- 2:30 PM ET: Jerome Powell press conference — Q&A with journalists for 45 minutes. Often more volatile than the statement
- 3:15-3:30 PM ET: occasional Trump tweet or other explosive political commentary
Why it's the most important event: the Fed influences the cost of money globally. A 25 bps hike on Fed Funds = more expensive USD loans worldwide, impacting emerging markets, real estate, stocks, crypto, everything.
Market anticipation: the CME FedWatch Tool (free) constantly displays probabilities for each scenario for the next meeting. If the decision deviates from this anticipation, explosive moves; if it conforms, moderate moves.
Common mistake: trading the initial statement alone. Often, the initial move is reversed during Powell's press conference when he qualifies or contradicts the written statement's tone. Always wait until the end of the press conference before taking a position.