This is a committee of Federal Reserve Board. They meet regularly to set up a monetary policy which includes rate of interest which is charged to the banks. This committee follows a specific set of laws which are followed by all and to know more federal open market committee homework answers can assist you with such.
Through this blog, you will be able to gain knowledge about the memberships, meetings, process of decision making, targeting rate of interest, etc. But before we move in-depth we will explore its meaning or definition to be clear about its purpose.
What is Federal Open Market Committee (FOMC)?
This committee is within Federal Reserve System and under the law of United States is permitted to oversee the operation of the open market that is selling and buying of treasury securities of United States. This committee makes important decisions about rate of interest and growth of money supply of the United States.
The principal agency of the national policy regarding monetary of the United States is the Federal Open Market Committee. The FOMC sets up monetary policy by determining the objectives for short-term of the operations of the open market for Federal Reserves or the Fed’s. This is a level for targeting the rate of federal funds that is the rate which commercial banks can charge one another for loans.
Operations are also directed by FOMC which are undertaken by the Fed in markets of foreign exchange. Though any kind of intervention in markets of foreign exchange has to be coordinated with U.S. Treasury as they are responsible for drafting policies in regard to the dollar’s exchange value. Federal open market committee homework answers describe the operations in detail for a better understanding so that your assignment or homework becomes easy.
Memberships of this Committee
This committee consists of seven members from the Board of Federal Reserve. The New York Fed president and four other presidents from the remaining eleven Federal Reserve Banks who serves a yearâ€™s term. The FOMC was constituted by 1933 Banking Act in which voting rights of Governors of Federal Reserve Board was not included. Later in 1935 Banking Act, it was included and in 1942 was amended which gave the 12 members right to vote which is still the structure.
Four presidents of Federal Reserve Bank serves a term of one year on the basis of rotation. Rotating seats fill with following four bank groups. From each group, one president from a bank is chosen. The four groups are:
- Philadelphia, Richmond and Boston
- Chicago and Cleveland
- Dallas, Atlanta, and St. Louis
- San Francisco, Minneapolis and Kansas City
President of the New York branch always has voting membership. Federal open market committee homework answers provide memberships and voting rights in details with up to date materials.
Meetings of FOMC
The law states that the FOMC has to meet four times in one year in Washington D.C. Eight scheduled meetings regularly have taken place in each year within eight to five weeks of one another. A special meeting or telephonic conference can be held in between the scheduled regular meetings if circumstances arise where some action or consultation is needed. At each scheduled meetings, this committee conducts voting in order to carry out policies in between meetings.
Process of Decision Making
Before each scheduled meeting, the staff creates written reports on prospective and past financial and economic developments which are mailed to members of the Committee and also to non-member presidents of Reserve Banks. During the meeting, oral reports are presented by the staff officers on prospective and current business situations, on financial development of international market and on financial market conditions.
In the discussions, the FOMC considers factors like trends in wages and prices, production and employment, spending and income of consumers, commercial and residential construction, inventories and investment in business, markets of foreign exchange, fiscal policy, credit and money aggregates and rates of interest.
All these reports, members of the Committee and presidents of other banks turn towards policy. Each of the participants presents his or her view on economic state and prospects for future and discusses appropriate way for monetary policy. Then each member recommends policy for the in-between meeting. Federal open market committee homework answers give a detailed view which helped me a lot with my homework.
Lastly, the FOMC should be able to reach consensus with regard to the best policy which would be incorporated in a memo to New York Federal Reserve Bank. This bank executes all transactions for System Open Account Market. The memo is cast designed for providing guidance to Manager in his or her day-to-day work in operations of open market. The memo sets up FOMCâ€™s objectives for growth of important credit and monetary aggregates in the long run.
Federal open market committee homework answers also provide information on operating guidelines or protocols for degree of restraint or ease which is needed in reserve expectations and conditions regarding growth rate in monetary aggregates in the short run. Policy is executed on supplying these reserves in a consistent manner with the objectives and with nationâ€™s expanding economic objectives.
There are many things which are discussed in this topic which is essential for a student to know about it, to clearly understand the way this committee works. Federal open market committee homework answers provide materials on congressional over sight and targeting interest rate, etc. It helped me a lot with my assignments and will do yours too.