What is FOMC Meeting?
By US law, the Federal Open Market Committee (FOMC), a committee within the Federal Reserve System, is charged with overseeing the country’s open market operations (buying and selling United States Treasury securities by the Fed). It committee of the Federal Reserve makes crucial decisions on interest rates and growth of the money supply of the US. The FOMC is the central organ of US domestic monetary policy. The Committee determines monetary policy by determining the short-term aim for the open market operations of the Fed, which is usually a target amount for the federal funds.
The Federal Open Market Committee ( FOMC)Â the detailed minutes of these meetings offer some of the greatest insights into the monetary policy decision-making process and what the FED feels regarding economic conditions inside and outside the United States. Markets tend to concentrate much of their attention on key issues discussed during the meeting which indicate potential changes in interest rates.
FOMC minutes include more details on the spectrum of views of Committee members on the correct policy posture, on the U.S. economic outlook, and on the direction of the short-term monetary policy. Around the time of the target rate decision, the statement is released, while the minutes are released three weeks after the FOMC meets. The degree to which market participants should scrutinize the FOMC minutes to collect knowledge beyond what is included in the statement is an empirically answerable issue.
The high frequency reaction of asset prices to news reports is a easy and reliable method for determining how information is impounded into security prices. The size of the effect of these FOMC meeting minutes is close to the effect of a macroeconomic report on the stock market like the ISM manufacturing index, and Forex rates but is less than the market impact caused by the release of the FOMC statement and Non Farm Payroll. Nevertheless, the asset price reaction to the minutes has declined since 2008 indicating the FOMC’s increased transparency.
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