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what is the federal open market committee | FOMC: Definition - YouTube
Channel: The Diary of a Trader
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The US Federal Reserve, is the most important
central bank in the whole world.
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Remember that all the other central banks
across the western world and the world in
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fact are watching the Federal Reserve before
making their own policy decisions.
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So all eyes really are on the Fed and remember
with the US dollar being the most traded currency
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in the world and it comprises of around 70
percent of all transactions on a given a debt
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on a given day.
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It's no surprise that the Federal Reserve
is really closely watched because it's just
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such an influential central bank.
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In the Federal Reserve there's a group called
the Federal Open Market Committee.
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You'll hear them referred to as the FOMC.
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This group consists of seven governors from
the Federal Reserve Board and five presidents
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from the twelve District Reserve banks.
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They aim to get long-term price stability
and long term growth and they meet to discuss
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monetary policy and to change it about eight
times a year.
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Again like most central banks they have a
website and you can go to the central bank's
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website here, federalreserve.gov and you can
see the stated aim of the Federal Reserve.
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The central bank of the United States provides
the nation with a safe flexible and stable
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monetary and financial system.
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If you go to news and events and you go to
press releases and then, if you click, click
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the monetary policy tab, you then see the
monetary policy meetings and the rate statements.
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So that was the last rate statement on the
13th of June.
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You just click on that and you can read the
rate statement that was made and they you
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can see that, they raised the fund rate to
1-3/4 to 2%.
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So there was a rate increase that was an expected
event.
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Another useful tool when considering the Federal
Reserve interest rates is something called
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the countdown to FOMC.
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It's the CME groups Fed watch tool and you
can access it here using this website.
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If you just Google CME Group trading interest
rates.
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You know FOMC something like that you should
hit it and it looks like this and this tool.
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It's got a user guide a video demo, exactly
how you can use it but essentially what it
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does it.
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It's very useful because it lets you know
what the probability of the rates being increased.
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So the current target rate is 1.75 to 2%.
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We've got that there and you can see that,
that's what it's expected to remain out in
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August.
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Now if you look in September, just click on
September, what they're expecting here is
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they're expecting, there's a 71 percent chance
of a target rate to be increased to 2 to 2.25
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percent.
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So you can see that an interest rate is expected
for September and then you can go from November
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and you can see.
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You know there's a 5.1 cent, probability that's
another interest rate rise and it's almost
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you know 40%, whether it's increased a further
2.25 to 250 or remains at that 2 to 2.25.
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So you can see by looking at this tool what
the probability and expectations are for the
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interest rates and that's a very helpful tool
as a trader because if some information comes
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out that radically affects those expectations.
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You're gonna see the US dollar having its
value.
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It's going to be changed and affected by these
expectations.Okay, that's the Federal Reserve,
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the most popular and most closely follow central
bank in the whole world and that is the FOMC
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CME Fed watched all worth having on your radar
and looking at when you're considering the
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Federal Reserve.
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