Federal Open Market Committee, Its Members, and What It Does

12 Strangers Who Change Your Life 8 Times a Year

Jerome Powell
•••  Photo by Alex Wong/Getty Images

The Federal Open Market Committee is the monetary policy arm of the Federal Reserve System, the central bank of the United States. It works with the Federal Reserve Board of Governors to control the three tools of monetary policy. The FOMC controls open market operations. The Board sets the discount rate and reserve requirement

The FOMC uses its tools to attain the ideal economic growth rate of between 2% and 3%. To achieve that, it must fight unemployment and inflation. The natural rate of unemployment is between 3.5% and 4.5%. Below that, companies can't find enough workers to remain productive.

The Fed's target inflation rate is 2%. 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.

To lower unemployment, the FOMC uses expansionary monetary policy. That boosts economic growth by increasing the money supply. It lowers rates to spur economic growth and reduce unemployment. FOMC members who favor this approach are called dovish.

If the economy grows too fast, then prices rise, causing inflation. To fight inflation, it 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. Members who favor this approach are called hawkish.

What the FOMC Does

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 these 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.

The Committee announces its decisions at its eight meetings per year. It explains its actions by commenting on how well the economy is performing, especially inflation and unemployment.

Although the FOMC sets a target for the fed funds rate, banks actually set the rate itself. 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. The Fed purchased massive amounts of Treasury notes and mortgage-backed securities to achieve its goals.


The FOMC is supposed to have twelve voting members. It currently has 10. Seven of the 12 positions are filled by the Federal Reserve's Board of Governors. Congress has only appointed five.

The other five FOMC members are Federal Reserve Bank presidents. Four of them serve one-year terms on a rotating basis. 

Jerome Powell is the Chair of the FOMC and the Fed Board. ​ He has been a Fed board member since May 25, 2012. His board term lasts until January 31, 2028. He was also a former senior Treasury official under President George H.W. Bush. He was a visiting scholar at the Bipartisan Policy Center and a partner at the Carlyle Group from 1997 to 2005. President Trump nominated him to replace Janet Yellen as the Fed chair. He is dovish. 

Here are the four remaining board members who sit on the FOMC:

  1. Lael Brainard, former senior Treasury official and an economic adviser to President Clinton. She is dovish.
  2. Randy Quarles, former managing director at Cynosure Group and the Carlyle Group. He was a Treasury official under President George W. Bush. Neither dovish nor hawkish, he favors using strict guidelines that determine when the Fed changes rates. He was Trump's first appointee. He is also the Vice Chairman for Supervision until October 13, 2021. That position was created by the Dodd-Frank Wall Street Reform Act. ​
  3. Richard Clarida was assistant secretary for economic policy at the U.S. Treasury from 2002 to 2003. He is a hybrid hawk and dove.
  4. Michelle Bowman was the State of Kansas bank commissioner. It's unknown whether she is hawkish or dovish.

The vice-chairmanship always goes to the president of the Federal Reserve Bank of New York. Since June 2018, that is former San Francisco Fed President John Williams.

The four Federal Reserve bank presidents who rotated onto the FOMC in 2020 are:

  1. Patrick Harker, Philadelphia. Moderate.
  2. Robert Kaplan, Dallas. Dovish.
  3. Neel Kashkari, Minneapolis. Dovish
  4. Loretta Mester, Cleveland. Hawkish. 

Four other Fed bank presidents are alternates in 2020. They become FOMC members in 2021. They are:

  1. Mary C. Daly, San Francisco. Dovish.
  2. Tom Barkin, first vice president, Richmond. Moderate.
  3. Raphael Bostic, Atlanta. Former Obama administration housing official. Moderate.
  4. Charles Evans, Chicago. Very dovish.

The first vice-president of the Bank of New York is a standing alternate. For 2020. he is Michael Strine.

These four bank presidents become alternates in 2021 and FOMC members in 2022. They are:

  1. James Bullard, St. Louis. Dovish.
  2. Esther George, Kansas City. Hawkish.
  3. Eric Rosengren, Boston. Dovish.
  4. Loretta Mester, Cleveland. Hawkish.

The remaining bank presidents will be alternates in 2022 and FOMC members in 2023. They are:

  1. Patrick Harker, Philadelphia. Moderate.
  2. Robert Kaplan, Dallas. Dovish.
  3. Neel Kashkari, Minneapolis. Dovish
  4.  Charles Evans, Chicago. Very dovish.

How the FOMC Affects 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, business, 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. (Sources: "This Is the Fed's Hawk-to-Dove Scorecard," Bloomberg Businessweek, December 18, 2015. "Where the FOMC Stands," CNBC, December 20, 2015.)

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Article Sources

  1. Board of the Federal Reserve System. "About the FOMC," Accessed March 3, 2020.