What is the FOMC meeting?
The FOMC (Federal Open Market Committee) is the committee of the U.S. Federal Reserve (Fed) responsible for making key decisions about monetary policy, especially:
- 🏦 Interest rates: Decides to raise, lower, or maintain the federal funds rate.
- 💰 Monetary policy: Controls the supply of money and credit in the economy.
- 📊 Stimuli or adjustments: Implements measures such as buying/selling Treasury bonds (quantitative easing/tightening).
🔍 When does it meet?
- 8 times a year (approximately every 6 weeks).
- The minutes and announcements are key events for financial markets.
📉 Why does it affect your investments?
1️⃣ Impact on interest rates
- If the FOMC raises rates:
- 📉 Stocks may fall (companies pay more for loans).
- 💵 Dollar (USD) usually strengthens.
- 🏠 Mortgages and credits become more expensive.
- If the FOMC lowers rates:
- 📈 Stocks usually react positively (cheaper money).
- 🏷️ Existing bonds increase in price.
2️⃣ Market expectations
- Investors speculate before each meeting.
- If the announcement does not match expectations, there is volatility (📊 e.g.: BTC)
3️⃣ Sectoral
- 🏦 Banks: Benefit from high rates (wider interest margins).
- 🛒 Consumer: High rates = less spending on durable goods (e.g.: cars, houses).
- 🌍 Emerging markets: High rates in the U.S. = capital flight to dollar-denominated assets.
🔮 Recent example
- In 2022-2023, the FOMC aggressively raised rates to combat inflation. This caused:
- Drop in tech (NASDAQ), rise in bond yields.
- Revaluation of the dollar against other currencies.
The FOMC is the thermostat of the economy and its decisions affect:
✅ Asset prices (stocks, bonds, currencies).
✅ Cost of borrowing (credit cards, mortgages).
✅ Investment strategies (risk or safety?).