Macro & Central BanksFederal Open Market CommitteeFed Rate Decision
FOMC
The Federal Reserve's rate-setting committee, which meets eight times a year to decide US monetary policy.
What FOMC means
The Federal Open Market Committee is the body within the Federal Reserve System that sets US monetary policy. It has twelve voting members: the seven governors, the president of the New York Fed, and four of the remaining regional presidents on an annual rotation, while all presidents attend and take part in the discussion. It holds eight scheduled meetings a year, releasing a policy statement at the close of each and publishing minutes about three weeks later. The chair usually gives a press conference immediately after the decision is announced.
Four times a year the committee also publishes the Summary of Economic Projections, which includes the dot plot showing where each participant expects the policy rate to sit at the end of coming years. Currency markets trade the whole package: the statement wording, the dots, the projections and the tone of the press conference can each move the dollar independently. The classic caveat is that the dot plot is a snapshot of individual expectations, not a plan or a commitment, and it is routinely revised at the next projection round.
Worked example
If the committee leaves rates unchanged but the median dot shifts from three expected cuts to one, the dollar can rally hard on a decision that technically changed nothing. Illustrative hypothetical, not a description of any particular meeting.
Related terms
- Federal ReserveThe central bank of the United States, responsible for US monetary policy and the world's primary reserve currency.
- Interest RateThe price of borrowing money, expressed as a percentage per year, with the central bank's policy rate anchoring the whole structure.
- HawkishDescribes a policymaker or statement that leans toward tighter monetary policy to contain inflation, which is usually currency-positive.
- DovishDescribes a policymaker or statement leaning toward looser monetary policy to support growth and employment, usually currency-negative.
- News TradingTrading around scheduled releases or unexpected headlines, seeking to profit from the repricing that surprises produce.
Frequently asked questions
What does FOMC mean in forex trading?
The Federal Reserve's rate-setting committee, which meets eight times a year to decide US monetary policy.
How does FOMC work in practice?
Four times a year the committee also publishes the Summary of Economic Projections, which includes the dot plot showing where each participant expects the policy rate to sit at the end of coming years. Currency markets trade the whole package: the statement wording, the dots, the projections and the tone of the press conference can each move the dollar independently. The classic caveat is that the dot plot is a snapshot of individual expectations, not a plan or a commitment, and it is routinely revised at the next projection round.
What is an example of FOMC?
If the committee leaves rates unchanged but the median dot shifts from three expected cuts to one, the dollar can rally hard on a decision that technically changed nothing. Illustrative hypothetical, not a description of any particular meeting.
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