# The Federal Reserve and the FOMC > The Federal Reserve sets US monetary policy through the FOMC. Learn how meetings work, the dot plot, statements and press conferences, and how Fed days trade. Source: https://learn.tradelabsai.com/macro/the-federal-reserve-and-the-fomc/ Track: Economics and Macro · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "The Federal Reserve and the FOMC", https://learn.tradelabsai.com/macro/the-federal-reserve-and-the-fomc/ The Federal Reserve, or Fed, is the central bank of the United States. Its decisions on interest rates and its balance sheet influence borrowing costs worldwide, the value of the dollar and the prices of stocks, bonds, gold and crypto. Monetary policy is set by the Federal Open Market Committee (FOMC), which meets eight times a year. FOMC announcements and the Fed Chair's press conferences are among the most closely watched events in global markets. ## Structure of the Fed | Part | Role | |---|---| | Board of Governors | Seven members in Washington, appointed by the President and confirmed by the Senate for 14 year terms | | Chair | Leads the Board and the FOMC; four year term as Chair | | 12 regional Federal Reserve Banks | Such as New York, Chicago and San Francisco; conduct research and supervise banks | | FOMC | 12 voting members: 7 governors, the New York Fed president and 4 rotating regional presidents | ## The Fed's mandate Congress gave the Fed a dual mandate: maximum employment and stable prices. The Fed defines price stability as 2% inflation, measured by the PCE price index. See [CPI and PCE](https://learn.tradelabsai.com/macro/cpi-and-pce/) and [Employment Data and Non-Farm Payrolls](https://learn.tradelabsai.com/macro/non-farm-payrolls/). ## The federal funds rate The FOMC sets a target range for the federal funds rate, the rate banks charge each other for overnight loans of reserves, such as 4.25% to 4.50%. The Fed steers market rates into that range mainly using the interest it pays on reserve balances and its overnight reverse repo facility. ## How an FOMC meeting works | Element | Timing | What markets watch | |---|---|---| | Statement | 2:00 p.m. Eastern on the second day | Rate decision, wording changes, votes and dissents | | Summary of Economic Projections (SEP) | Four meetings a year (March, June, September, December) | Forecasts for growth, unemployment, inflation and rates | | Dot plot | With the SEP | Each participant's view of the appropriate rate path | | Press conference | 2:30 p.m. Eastern | Chair's explanations and answers | | Minutes | Three weeks later | Details of the discussion | ## The dot plot The dot plot shows where each FOMC participant thinks the federal funds rate should be at the end of the next few years and in the longer run. The median dot is widely reported. Markets compare it with futures pricing; a gap often moves markets. **Example: Reading a Fed day** Futures price a 70% chance of a 0.25 point cut. The Fed cuts as expected, but the dot plot's median shows only two more cuts next year versus four priced by markets, and the Chair stresses inflation risks. Two year yields rise 12 basis points, the dollar strengthens and stocks fall from their highs in the hour after the decision. A cut can be hawkish if guidance is less dovish than expected. See [Central Banks Explained](https://learn.tradelabsai.com/macro/central-banks-explained/). ## Balance sheet policy The Fed's balance sheet grew from about $900 billion before 2008 to nearly $9 trillion in 2022 through quantitative easing. It then began quantitative tightening, letting bonds mature without reinvesting. Balance sheet decisions affect long term yields and market liquidity. See [Quantitative Easing and Tightening](https://learn.tradelabsai.com/macro/quantitative-easing/). ## Fed communication Between meetings, Fed officials give speeches and interviews. A "blackout period" starts the second Saturday before each meeting and ends the day after, during which officials do not discuss policy publicly. Major annual events include the Jackson Hole symposium in late August, where Chairs have often signalled policy shifts. ## Trading Fed days 1. **Know market expectations** using tools such as CME FedWatch. 2. **Expect two volatility bursts:** at 2:00 p.m. and during the 2:30 p.m. press conference. 3. **Read statement changes** line by line against the prior statement. 4. **Watch two year yields and the dollar** for the market's verdict. 5. **Reduce size** or wait if not trading the event deliberately. See [News Trading](https://learn.tradelabsai.com/strategies/news-trading/). ## Frequently asked questions ### What is the FOMC? The Federal Open Market Committee, the Fed's monetary policy committee, which sets the federal funds rate target and balance sheet policy. ### How often does the FOMC meet? Eight scheduled times a year, about every six weeks, with emergency meetings possible. ### What is the dot plot? A chart showing each FOMC participant's projection for the federal funds rate at the end of upcoming years and in the longer run. Next, learn about Europe's and Japan's central banks in [The ECB and the BOJ](https://learn.tradelabsai.com/macro/the-ecb-and-the-boj/). ## Sources - Federal Reserve, [FOMC](https://www.federalreserve.gov/monetarypolicy/fomc.htm) ## Continue learning - Next lesson: [The ECB and the BOJ](https://learn.tradelabsai.com/macro/the-ecb-and-the-boj/) - Previous lesson: [Central Banks Explained](https://learn.tradelabsai.com/macro/central-banks-explained/) - Related: [Central Banks Explained](https://learn.tradelabsai.com/macro/central-banks-explained/): Central banks set interest rates and manage money to control inflation and support growth. Learn their mandates, policy tools, communication and market impact. - Related: [Interest Rates](https://learn.tradelabsai.com/macro/interest-rates/): Interest rates are the price of money and a key driver of asset prices. Learn policy vs market rates, real rates and how rates move stocks, bonds and currencies. - Related: [Quantitative Easing and Tightening](https://learn.tradelabsai.com/macro/quantitative-easing/): Quantitative easing is central bank bond buying to lower long term rates; tightening reverses it. Learn how QE and QT work, their history and market effects. - Related: [CPI and PCE](https://learn.tradelabsai.com/macro/cpi-and-pce/): CPI and PCE are the main US inflation measures. Learn how they differ, headline vs core, supercore, release timing and how traders react to inflation surprises. - Related: [Employment Data and Non-Farm Payrolls](https://learn.tradelabsai.com/macro/non-farm-payrolls/): The US jobs report includes non farm payrolls, unemployment and wage growth. Learn what each number means, release timing, revisions and how markets react.