The Federal Open Market Committee (FOMC) is an important part of the Federal Reserve Board that decides on the direction of monetary policy. The committee meets several times a year to decide on the maintenance and modifications of the current monetary policy. When a decision is made to introduce a change in current policies, it results in the purchase or sale of US government securities on the open market to achieve the development of the economy.

FOMC structure

I. Its Board of Governors is made up of seven members, seven members, who are appointed by the President of America with the approval of the Senate.

II. The chairman of the board is the president of the Federal Reserve Bank of New York.

third of 11, four Federal Reserve Bank presidents serve as chairmen at the FOMC on a rotating basis. The remaining three presidents can attend FOMC meetings, but are not allowed to vote on important monetary policy issues.

FOMC-how does it work?

The FOMC organizes eight meetings in a year and the meetings are held in secret. The chairman of the board is nominated by the president of the Americas. Since the Federal Reserve System is the central bank of the United States, the main responsibility of the agency is to achieve effective promotion of the objectives of achieving maximum employment, price stability and a moderate interest rate in the long term. Like the other central banks in the world, the Fed does not have clear and proven inflation targets. Its success has always inspired non-quantifiable inflation targeting.

How does the FOMC decide interest rates?

The decision to increase, decrease or keep interest rates unchanged has a direct impact on the US dollar. Increase in interest rates When the board makes a decision to increase interest rates, it sells US government securities to major financial traders, who would again pay the money by transferring it to the FOMC account. This creates a shortage of US dollars in the banking system and increases the value of the currency.

Decrease in interest rates

When the FOMC is cutting interest rates, it literally buys US government securities from major financial traders. Forex FOMC would then transfer the money to the dealers’ accounts. This would increase the supply of US dollars in the banking system and therefore reduce the value of the currency.

Interest Rates Change the Forex World Entirely

The world of Forex trading is completely dependent on interest rates. The interest rate of the currency is the most important factor in knowing the perceived value of the currency.

Trading is carried out with the perceived value of the currency. Forex traders are always concerned about fluctuations in interest rates. Fluctuations result in price stability or inflation.

Investors literally wait with the FOMC statement as it has a major impact on expectations for rate hikes. When the FOMC statement has an upbeat assessment of the economy, this would simply add to the increase in the value of the dollar. In a sense, the FOMC completely rules the world of Forex trading.