Editing Federal Open Market Committee (section)

{{Short description|Chief body of the U.S. Federal Reserve System that sets national monetary policy}}
{{Use American English|date = March 2019}}
{{Use mdy dates|date=April 2017}}

The '''Federal Open Market Committee''' ('''FOMC''') is a committee within the [[Federal Reserve System]] (the Fed) that is charged under [[United States law]] with overseeing the nation's [[open market operations]] (e.g., the Fed's buying and selling of [[United States Treasury security|United States Treasury securities]]).<ref name="what is fomc">{{cite web|url=http://www.federalreserve.gov/monetarypolicy/fomc.htm|access-date=February 23, 2016|title=What is the FOMC and when does it meet?|publisher=Board of Governors of The Federal Reserve System|date=December 2015}}</ref> This Federal Reserve committee makes key decisions about interest rates and the growth of the United States money supply.<ref>{{cite book | last1 = O'Sullivan | first1 = Arthur | author-link = Arthur O'Sullivan (economist) | first2 = Steven M. | last2 = Sheffrin | author-link2=Steven M. Sheffrin | title = Economics: Principles in Action | publisher = Pearson Prentice Hall | year = 2003 | location = Upper Saddle River, NJ | page = 418 | isbn = 0-13-063085-3}}</ref> Under the terms of the original [[Federal Reserve Act]], each of the Federal Reserve banks were authorized to buy and sell in the open market bonds and short term obligations of the [[United States Government]], bank acceptances, cable transfers, and bills of exchange. Hence, the reserve banks were at times bidding against each other in the open market. In 1922, an informal committee was established to execute purchases and sales. The [[Banking Act of 1933]] formed an official FOMC.<ref>{{Cite book|title=Money and Banking|publisher=American Institute of Banking|year=1940|location=New York|pages=440}}</ref>

The FOMC is the principal organ of [[Monetary policy of the United States|United States national monetary policy]]. The Committee sets [[monetary policy]] by specifying the short-term objective for the Fed's open market operations, which is usually a target level for the [[federal funds rate]] (the rate that commercial banks charge between themselves for overnight loans).

The FOMC also directs operations undertaken by the Federal Reserve System in [[foreign exchange market]]s, although any intervention in foreign exchange markets is coordinated with the [[U.S. Treasury]], which has responsibility for formulating U.S. policies regarding the exchange value of the dollar.