How an FOMC meeting works, from the agenda to the FOMC statement

The Federal Open Market Committee, or FOMC, is the body within the Federal Reserve System that sets the stance of US monetary policy. It meets on a published schedule, reviews economic and financial conditions, votes on a policy decision and releases a written statement explaining what it decided. The decision most closely watched is the target range for the federal funds rate, the rate banks charge one another for overnight loans of reserve balances.

This guide explains who sits on the committee, how a meeting is organized, what the Federal Reserve publishes afterward and where readers can verify each step. It is a general description of the process, based on the Fed’s own pages, and it does not predict any outcome.

In brief

• The FOMC has 12 voting members: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York and four other Reserve Bank presidents who rotate.
• The committee holds eight regularly scheduled meetings a year, and it can also meet between those dates.
• After each regular meeting it issues a policy statement, and the chair holds a press conference.
• Minutes follow about three weeks later. Full transcripts are released after five years.

What the FOMC is responsible for

The Federal Reserve Act, in Section 2A, directs the Board of Governors and the FOMC to maintain long-run growth of money and credit in line with the economy’s long-run capacity, so as to promote the goals of maximum employment, stable prices and moderate long-term interest rates. The Fed describes the first two as its dual mandate. In practice, the committee’s longer-run statement defines stable prices as inflation of 2 percent over the longer run, measured by the personal consumption expenditures price index.

The Fed’s page on the committee says that at its meetings the FOMC reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. The FOMC is responsible for open market operations, which are purchases and sales of securities that help carry out its decisions. The Board of Governors, not the FOMC, handles the discount rate and reserve requirements.

Who takes part

Voting members

There are 12 voting members. Seven are the members of the Board of Governors, who are appointed by the President and confirmed by the Senate. The Board’s chair also chairs the FOMC. The president of the New York Fed holds a permanent vote and serves as vice chair. The remaining four votes rotate among the other 11 Reserve Bank presidents, who serve one-year terms.

Nonvoting participants

All Reserve Bank presidents attend meetings and take part in the discussion, including those who do not vote that year. The Fed’s page on the committee notes that nonvoting presidents join the discussions. This matters when reading the minutes, which describe the views of participants as well as members.

Staff

Economists and other staff at the Board and the Reserve Banks prepare briefings on the economy, financial markets and policy options. The committee relies on those materials, though the decision is made by the voting members.

The meeting calendar

The Fed publishes the FOMC calendar on its website. It lists the meeting dates for the year, marks the meetings at which participants submit economic projections, and shows the dates on which minutes are scheduled for release. According to the Fed’s explanation of the committee, the FOMC schedules eight regular meetings a year, roughly six weeks apart. The calendar page marks projections meetings with an asterisk, and those fall in March, June, September and December.

The committee can also hold unscheduled meetings to review developments, and it may act between meetings if circumstances require. These are uncommon, and the Fed announces them when they occur.

How a meeting unfolds

The Fed does not publish a minute-by-minute agenda, but its published materials describe the general sequence. Readers should treat the following as a general outline and check the minutes for any particular meeting.

1. Briefings on the economy and markets. Staff present their assessment of the economic outlook and of financial conditions. Participants may also hear a report on recent market operations.
2. Participants’ views on the economy. Members and nonvoting Reserve Bank presidents each give their view of conditions, including growth, the labor market and inflation, and the risks they see.
3. Policy discussion. The committee discusses what stance of policy is appropriate, whether to change the target range for the federal funds rate, and what to say about the balance sheet and about the outlook.
4. The directive and vote. The chair puts a proposed decision to the voting members. Votes, including any dissents, are recorded in the statement and in the minutes.
5. Statement. The committee approves the text of the statement that explains the decision.

The meeting typically runs for two days. The statement is released at the end of the second day, followed by the chair’s press conference.

What the Fed publishes afterward

The policy statement

After each regular meeting the FOMC issues a statement. It announces the decision on the target range for the federal funds rate, summarizes the committee’s assessment of the economy and states the vote. A companion implementation note describes how the Fed will carry out the decision, including the rates it will set on certain tools. The companion guide to this one explains how to read an FOMC statement paragraph by paragraph.

The press conference

According to the Fed’s explanation of the committee, the chair holds a press briefing after each regular meeting. The chair also discusses participants’ economic projections at the press conference following the last meeting of each quarter. The press conference gives the chair room to explain the reasoning behind the decision and to answer questions, and the Fed publishes the opening statement and a transcript of the proceedings.

The Summary of Economic Projections

Four times a year, in March, June, September and December, FOMC participants submit projections that are published as the Summary of Economic Projections, or SEP. Each Board member and Reserve Bank president submits projections for real GDP growth, unemployment, inflation measured by the PCE price index and core PCE inflation, and the federal funds rate. Projections cover the current year, the next three years and the longer run.

The dot plot is one chart in the SEP. Each dot represents one participant’s view of the appropriate federal funds rate at a point in time, rounded to the nearest one-eighth of a percentage point. The Fed cautions that each projection reflects the participant’s own view of appropriate policy and is not a single committee forecast. It also notes that the path of the federal funds rate is uncertain because the committee adjusts policy as conditions change.

The minutes

The minutes are a detailed written account of the meeting. The Fed’s explanation of the committee states that full minutes are published three weeks after each regular meeting, and the calendar page lists the scheduled date for each. The minutes summarize the staff’s presentations, participants’ views and the discussion of policy. A separate guide in this series compares the minutes with the statement.

Transcripts

Complete transcripts of the meeting are released five years after it takes place. They are the most detailed record, but they are historical and offer no help in anticipating a coming decision.

A walk through one decision, in general terms

The following is a simplified, hypothetical sequence and not a description of a real meeting.

Before the meeting, staff conclude that inflation has run above the 2 percent goal for several months while the labor market remains solid. During the first day, participants describe conditions in their regions and sectors and debate how much of the inflation is temporary. On the second day the chair proposes a decision, say a quarter-point increase in the target range for the federal funds rate. The voting members approve, and one member prefers no change. The statement is released with the vote count and the dissenting member’s name.

The chair then holds a press conference. Three weeks later the minutes show how many participants saw further increases as likely to be appropriate and how many wanted to wait. Observers use that account, together with later data, to judge how the next meeting might go. They do not know the outcome in advance, and the committee says its decisions depend on incoming information.

Key terms

• Target range: the interval the FOMC sets for the federal funds rate, such as a range one quarter of a percentage point wide.
• Dissent: a vote by a member against the majority decision.
• Directive: the instruction to the New York Fed’s trading desk for carrying out open market operations.
• Forward guidance: communication about the likely future path of policy.
• Balance sheet: the Fed’s holdings of securities and other assets and liabilities, which the committee can also adjust.
• Dual mandate: the goals of maximum employment and stable prices.

Common misconceptions

The chair does not decide alone. The decision is a vote of the 12 members, and the chair casts one of them.

The dot plot is not a promise. The Fed describes it as a collection of individual projections that change as the economy changes.

The Board of Governors and the FOMC are not the same. The Board has seven members and handles functions such as the discount rate and reserve requirements, while the FOMC has 12 voting members and directs open market operations.

A meeting without a rate change is not a meeting with nothing to learn. The statement’s wording, the vote and the press conference often move expectations about later meetings even when the target range stays the same.

FAQ

How many times a year does the FOMC meet?

The FOMC schedules eight regular meetings a year, roughly six weeks apart, according to the Fed. It can also hold unscheduled meetings.

Who gets to vote on the FOMC?

Twelve people: the seven governors, the New York Fed president and four other Reserve Bank presidents who rotate in one-year terms.

When are FOMC minutes released?

The Fed states that minutes are published three weeks after each regular meeting. The calendar page lists the specific date for each meeting.

What is the difference between the statement and the dot plot?

The statement is the committee’s official decision and explanation, approved by vote. The dot plot is part of the quarterly Summary of Economic Projections and shows individual participants’ views, not a committee decision.

Where can I check meeting dates and documents?

The Federal Reserve Board’s website has a page for FOMC calendars, statements, minutes and projections. It is the authoritative source for dates and for the text of each release.