policy committee in the Federal Reserve System that sets short-term monetary policy objectives for the Fed. The committee is made up of the seven governors of the Federal Reserve Board, plus five of the 12 presidents of Federal Reserve Banks. The president of the Federal Reserve Bank of New York is a permanent FOMC member. The other four slots are filled on a rotating basis by presidents of the other 11 Federal Reserve Banks. The committee carries out monetary objectives by instructing the Open Market Desk at the Federal Reserve Bank of New York to buy or sell government securities from a special account, called the open market account, at the New York Fed. When the FOMC purchases securities, it adds reserves to the banking system, expanding the supply of credit and allowing banks to make more loans; when it sells securities, it drains reserves and tightens credit.
The Federal Open Market Committee generally buys and sells securities, normally U.S. Treasury bills, for longer-term impact. For short-term adjustment of bank reserves, it will sell securities to a securities dealer with an agreement to repurchase (a matched sale-purchase agreement), or buy securities from a dealer, followed by a subsequent resale back to the dealer (a repurchase agreement). Open market operations are one of three monetary policy tools of the Federal Reserve; the others are the discount rate and reserve requirements on transaction and time deposit accounts.
key committee in the Federal Reserve System, which sets short-term monetary policy for the Fed. The committee comprises the seven governors of the Federal Reserve System, the president of the New York Federal Reserve Bank, and the presidents of four other Federal Reserve Banks. To tighten the money supply, which decreases the amount of money available in the banking system, the Fed sells government securities.
