FOMC: What It Is, Who Is On It, and What It Does

12 Strangers Who Change Your Life Eight Times a Year

U.S. Federal Reserve Chairman Jerome Powell speaks during a news conference March 21, 2018 in Washington, DC

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The Federal Open Market Committee (FOMC) conducts monetary policy for the U.S. central bank. As an arm of the Federal Reserve System, its goal is to promote maximum employment, stable prices, and moderate interest rates over time.

What Is the Federal Open Market Committee (FOMC)?

The FOMC uses monetary policy to influence the availability of money and credit. Eight times a year, the FOMC announces its decisions at a committee meeting, explaining its actions by commenting on how well the economy is performing, especially inflation and unemployment.

The Federal Reserve Act of 1913 gave the Federal Reserve and the FOMC responsibility for setting monetary policy.

Who Is on the FOMC?

The Committee is made up of 12 voting members. These include the chair and six other governors appointed by Congress. It also includes the vice chair and four other regional Federal Reserve Bank presidents. The vice chair position is permanent, while the regional presidents serve one-year terms on the FOMC on a rotating basis.


Jerome H. Powell became the chairman of the FOMC and the Federal Reserve Board of Governors on Feb. 5, 2018, for a four-year term lasting through Jan. 31, 2028. ​He has been a Fed board member since May 25, 2012.

Prior to joining the Fed, Powell was a former senior Treasury official under former President George H.W. Bush, a visiting scholar at the Bipartisan Policy Center, and a partner at the Carlyle Group from 1997 to 2005. He replaced Janet Yellen as the Fed chair.

Vice Chair

The vice chairmanship always goes to the president of the Federal Reserve Bank of New York. Since June 2018, formed San Francisco Fed President John Williams has held that title.

Congressional Appointees

There are five congressional appointees who currently sit on the FOMC. One position is vacant.

Lael Brainard (committee term: June 16, 2014, to Jan. 31, 2026) was an Under Secretary of the Treasury Department, a senior member of the Brookings Institution, and Deputy National Economic Advisor to former President Bill Clinton. She was also a professor of economics at M.I.T.'s Sloan School of Management.

Richard H. Clarida (Sept. 17, 2018, to Jan. 31, 2022) was an economics professor at Columbia University and director at PIMCO. In addition, Dr. Clarida served as the assistant secretary of the U.S. Department of the Treasury for Economic Policy from February 2002 until May 2003.

Randal Quarles (Oct. 13, 2017, to Jan. 31, 2032) is the Vice Chair for Supervision until Oct. 13, 2021. He is also the chair of the Financial Stability Board. Both positions were created by the Dodd-Frank Wall Street Reform Act to strengthen financial stability after the 2008 financial crisis. Prior to taking on these roles, he was managing director at Cynosure Group and the Carlyle Group, and also a Treasury official under former President George W. Bush.​

Michelle Bowman (Nov. 26, 2018, to Jan. 31, 2034) was the State of Kansas bank commissioner—an experience that Congress requires at least one board member have. Prior to joining the banking industry, Bowman worked in senior positions in the Department of Homeland Security (DHS) and the Federal Emergency Management Agency (FEMA), and also led a London-based government and public affairs consultancy.

Christopher Waller (Dec. 18, 2020, to Jan. 31, 2030) was the director of research at the Federal Reserve Bank of St. Louis since June 2009 prior to his appointment on the Board. He was also an economics professor at the University of Notre Dame and the University of Kentucky.

Regional Bank Presidents

The four Federal Reserve bank presidents who rotate onto the FOMC for 2021 are:

  • Mary C. Daly, San Francisco
  • Thomas Barkin, Richmond
  • Raphael Bostic, Atlanta
  • Charles Evans, Chicago

Four other Fed bank presidents are alternates in 2021. They become FOMC members in 2022. They are:

  • James Bullard, St. Louis
  • Esther L. George, Kansas City
  • Naureen Hassan, First Vice President, New York
  • Loretta J. Mester, Cleveland
  • Kenneth C. Montgomery, First Vice President, Boston

What Does the FOMC Do?

The FOMC works with the Federal Reserve Board of Governors to control the four tools of monetary policy: the reserve requirement, open market operations, the discount rate, and interest on excess reserves. The FOMC sets a target range for the fed funds rate at its meetings. The Board sets the discount rate and reserve requirement. 

The FOMC uses its tools to attain maximum employment and stable prices. To achieve that, it must manage unemployment and inflation.

President Joe Biden wants the Fed to expand its purpose to include closing racial and economic gaps. He'd like Congress to amend the Federal Reserve Act to require the Fed to include these in its scope. Biden would ask the Fed to require faster check clearing, better help low-income families, and to achieve greater diversity in its hiring practices.

The Fed's Economic Targets

The Fed's target inflation rate is 2% over time. It wants prices to increase by 2% each year. When that happens, people expect inflation. It motivates them to buy now rather than later. A mild inflation rate spurs demand, and that's good for economic growth.

On Aug. 27, 2020, the Fed announced it would tolerate inflation above 2% if it had been running persistently below 2%.

The FOMC no longer has a definitive target for the natural rate of unemployment. Before the 2020 recession, unemployment was historically low without triggering inflation. Instead, the Fed now reviews a broad range of information rather than relying on a single unemployment rate target.

How the Fed Implements Monetary Policy

To reduce unemployment, the FOMC uses expansionary monetary policy. That boosts economic growth by increasing the money supply and lowers rates to spur economic growth and reduce unemployment.

If the economy grows too fast, then prices rise, causing inflation. To fight inflation, the FOMC uses contractionary monetary policy. That makes money more expensive, slowing the economy down. A slower economy means that businesses can't afford to raise prices without losing customers. They may even need to lower prices to gain customers. This combats inflation.

The Committee adjusts interest rates by setting a target for the fed funds rate. This is the rate that banks charge each other for overnight loans known as fed funds. Banks use the fed funds loans to make sure they have enough to meet the Fed's reserve requirement. Banks must keep this reserve each night at their local Federal Reserve bank or in cash in their vaults.

On March 15, 2020, the Board of Governors reduced the reserve requirement to zero, in an effort to further support the economy during a time of crisis.

Although the FOMC sets a target for the fed funds rate, banks actually set the rate themselves. The Fed pressures banks to conform to its target with its open market operations. The Fed purchases securities, usually Treasury notes, from member banks. When the Fed wants the rate to fall, it buys securities from banks. In return, it adds to their reserves, giving the bank more fed funds than it wants. Banks will lower the fed funds rate to lend out this extra reserve.

Conversely, when the Fed wants rates to rise, it replaces the bank's reserves with securities. This reduces the amount available to lend, forcing the banks to increase rates.

To fight the 2008 financial crisis, the FOMC greatly expanded its use of open market operations. That's called quantitative easing (QE). The Fed purchased massive amounts of Treasury notes and mortgage-backed securities to achieve its goals. It reinstated QE in March 2020 to combat the recession caused by the global health crisis.

How Does the FOMC Affect You?

The FOMC affects you through control of the fed funds rate. Banks use this rate to guide all other interest rates. As a result, the fed funds rate controls the availability of money to invest in houses, businesses, and ultimately in your salary and investment returns. This directly affects the value of your retirement portfolio, the cost of your next mortgage, the selling price of your home, and the potential for your next raise.

Pay close attention to the FOMC meeting announcements so you can anticipate economic changes and take steps to enhance your personal finances.