Importance of the Federal Market Commitee

Essay by austinnpCollege, UndergraduateA+, December 2003

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Why is the FOMC important to US stability?

The FOMC or Federal Market Committee is the Federal Reserves monetary policymaking body. Their responsibilities include the formation of policy which is designed to promote stable prices and economic growth. In short the FOMC basically manages our nation's money supply.

The FOMC is managed by a Board of Governors who are responsible for coming up with the policies. They typically meet eight times a year in Washington, D.C. At these meetings they discuss the outlook for the U.S. economy and monetary policy options. While all Reserve Banks presidents participate in policy discussions it is the Board of Governors who vote on the policy.

This part of the Federal Reserve is vital towards our economy. Their efforts show direct results on our unemployment rates, economic growth, and the stabilization of prices. While some may argue that unemployment rates along with are economic growth are still below expectations, without the efforts of the FOMC these areas would be much worse off.

The FOMC is also responsible for setting the Federal Funds Rates. This is crucial in determine how banks lend money to each other and set the tone for all other interest rates throughout the country. It is easy to see from this example how actions of the FOMC have a direct impact on everyday citizens. The Federal Funds Rate may be the reason your car loan rate is higher than you may have expected, or even for a home loan. The point is the decisions made by the FOMC impact every citizen one way or another, whether it is via interest rates or simply the impact the state of the economy as a whole has on our nation's citizens.