FOMC: Federal Open Market Committee explained

By Ken Chigbo, Founder, KenMacro. Published 2026-05-13.

What is FOMC?

The Federal Open Market Committee, or FOMC, is the body inside the US Federal Reserve System that decides monetary policy for the United States. It comprises twelve voting members: the seven Governors of the Federal Reserve Board, the President of the New York Fed, and four of the remaining eleven regional Reserve Bank Presidents who rotate annually. The committee sets the target range for the federal funds rate, guides the size and composition of the Fed's balance sheet, and signals forward guidance through its statement and Summary of Economic Projections. Decisions are taken by majority vote at scheduled meetings.

How traders use FOMC

Retail and institutional desks treat FOMC decision days as tier-one event risk. The statement releases at 2:00pm Eastern Time, followed by the Chair's press conference at 2:30pm, with the full meeting cycle producing two distinct volatility windows. Traders watch the policy rate decision, the vote split, any changes to statement language, and on quarterly meetings the dot plot and economic projections. Dollar pairs, US Treasuries, gold, and equity indices typically see widened spreads and gapping during the announcement. The desk routinely cuts position size around FOMC and avoids placing stops at obvious round levels given the whipsaw behaviour common in the first ten minutes. Minutes from each meeting release three weeks later and often produce a secondary reaction.

Common misconceptions about the FOMC

The first misconception is that the FOMC sets all US interest rates directly. It does not. The committee sets a target range for the federal funds rate, and market rates across the curve adjust based on expectations of future policy. The second is that the Fed Chair decides policy alone. The Chair holds one vote and chairs the meeting, but decisions require a majority. The third is that hikes always strengthen the dollar and cuts always weaken it. Market reaction depends on whether the decision and guidance match what was already priced into rates futures and the dollar index before the meeting.

Join the Macro Mastery desk

Frequently asked

How often does the FOMC meet?

The FOMC holds eight scheduled meetings each calendar year, roughly every six weeks. Four of those meetings, typically in March, June, September, and December, are accompanied by the Summary of Economic Projections and the dot plot showing where each participant expects rates to be in coming years. The committee can also call unscheduled meetings in response to crises, as it did during the 2008 financial crisis and the March 2020 pandemic response.

Who votes on FOMC decisions?

Twelve members vote at each meeting. The seven Governors of the Federal Reserve Board hold permanent votes, as does the President of the Federal Reserve Bank of New York. The remaining four voting seats rotate annually among the Presidents of the other eleven regional Reserve Banks. All twelve Reserve Bank Presidents attend meetings and contribute to discussion, but only the rotating four cast votes in any given year.

What is the difference between the FOMC statement and the minutes?

The statement is the short policy document released at 2:00pm ET on decision day, announcing the rate decision and committee assessment. The minutes are a detailed record of the discussion at the meeting, including dissenting views and economic analysis, released three weeks after the decision. Traders study the statement for immediate direction and the minutes for nuance around how unified the committee was and what conditions might shift the next decision.

Why does the FOMC move forex pairs so sharply?

Interest rate differentials are the single largest long-term driver of currency valuation. When the FOMC shifts the federal funds rate target or signals a change in pace through forward guidance, the implied yield on dollar-denominated assets reprices instantly, pulling capital flows with it. Dollar pairs and US Treasury yields adjust within milliseconds of the release, and the press conference often produces a second leg as the Chair clarifies or contradicts the written statement.

Educational analysis only. Past performance does not guarantee future results. Manage risk against your own portfolio.