What Is the Federal Open Market Committee (FOMC)?
Let me tell you directly: the Federal Open Market Committee directs open market operations in the United States. This committee includes 12 members—seven from the Board of Governors, the president of the Federal Reserve Bank of New York, and four other Reserve Bank presidents who rotate in.
As a part of the Federal Reserve System, the FOMC governs the nation's monetary policy. You need to know that it determines policy direction by managing these operations.
Understanding the Federal Open Market Committee (FOMC)
The 12 FOMC members meet eight times a year to decide on near-term monetary policy changes. If they vote for a change, it means buying or selling U.S. government securities on the open market to support healthy economic growth.
Members fall into categories: hawks who push for tighter policies, doves who prefer stimulus, or centrists in the middle. The chair of the FOMC is also the Board of Governors chair.
For 2025, Jerome Powell is the chair; he started his second four-year term on May 23, 2022, after his first in February 2018, and he's seen as a moderate. John Williams is vice-chair and president of the New York Fed since 2018. Other board members are Michael S. Barr, Michelle W. Bowman, Lisa D. Cook, Philip N. Jefferson, Adriana D. Kugler, and Christopher J. Waller.
There are 12 Federal Reserve districts, each with a bank acting as an extension of the central bank. The New York president serves continuously, while others rotate on a one-year term every three years—except Cleveland and Chicago, which rotate every two years.
The rotating seats come from these groups: Boston, Philadelphia, and Richmond; Cleveland and Chicago; St. Louis, Dallas, and Atlanta; Kansas City, Minneapolis, and San Francisco. This setup ensures fair regional representation.
2025 FOMC Members
- Jerome H. Powell: Chair of the Federal Reserve Board
- John C. Williams: Vice-Chair of the Federal Reserve Board and President of the Federal Reserve Bank of New York
- Michael S. Barr: Member of the Federal Reserve Board
- Michelle W. Bowman: Member of the Federal Reserve Board
- Susan M. Collins: President of the Federal Reserve Bank of Boston
- Lisa D. Cook: Member of the Federal Reserve Board
- Austan D. Goolsbee: President of the Federal Reserve Bank of Chicago
- Philip N. Jefferson: Member of the Federal Reserve Board
- Adriana D. Kugler: Member of the Federal Reserve Board
- Alberto G. Musalem: President of the Federal Reserve Bank of St. Louis
- Jeffrey R. Schmid: President of the Federal Reserve Bank of Kansas City
- Christopher J. Waller: Member of the Federal Reserve Board
FOMC Meetings
The FOMC holds eight regular meetings each year, and they can add more if needed. These aren't public, so Wall Street speculates a lot about whether the Fed will tighten or loosen the money supply, affecting interest rates.
Meeting minutes get released afterward. When you hear news about the Fed changing rates, it's from these meetings.
In meetings, members discuss local and global financial developments, plus economic forecasts. Everyone—the governors and all 12 bank presidents—shares views on the economy and the best policy. Then, only the designated FOMC members vote on it.
At the December 2024 meeting, they cut the fed funds rate to 4.25%-4.5%, down 0.25% from November.
FOMC Operations
The Fed has tools to adjust the money supply: open market operations, discount rate changes, and reserve requirements. The Board of Governors handles the discount rate and reserves, but the FOMC specifically manages open market operations by buying or selling government securities.
To tighten the supply, the Fed sells securities, reducing money in the system. Bought securities go into the System Open Market Account (SOMA), with domestic holdings in U.S. Treasuries and agency securities, and foreign in euros and yen.
The FOMC can hold or sell these as needed, per the Federal Reserve Act of 1913 and Monetary Control Act of 1980. Holdings are distributed across the 12 regional banks, but New York handles all transactions.
After a meeting, the SOMA manager gets the results and directs the New York trading desk to execute trades until the mandate is met. All this sets the federal funds rate, which banks use for overnight lending, influencing other rates, credit, investment, employment, and output.
Special Considerations
On January 30, 2024, the FOMC reaffirmed its Statement of Longer-Run Goals and Monetary Policy Strategy. This commits to Congress's mandate for maximum employment, stable prices, and moderate long-term rates.
Since policy sets long-term inflation, they target 2% as most consistent with the mandate.
Frequently Asked Questions
What does the FOMC do? It directs monetary policy through open market operations. This 12-member group sets the Fed's short-term goals for securities trades, targeting the fed funds rate to influence other rates.
Is the FOMC the same as the Fed? No, it's a committee within the Fed focused on open market operations. The Board of Governors handles discount rates and reserves.
How often does the FOMC meet? Eight times a year.
The Bottom Line
The FOMC sets monetary policy by managing open market operations, influencing the fed funds rate and other interest rates. This allows the Fed to contract or expand the economy based on market conditions.
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