What is FOMC Minutes and Why Should I Care?
What Is the FOMC and What Does it Do?
The Federal Open Market Committee (#FOMC) is a group of 12 people who are responsible for monetary policy in the United States. The FOMC members are the heads of the Federal Reserve Banks and are joined by regularly rotating guests from the financial community. The Committee’s job is to influence the amount of money in the economy in order to achieve the nation’s economic goals. The Committee meets eight times a year to discuss economic conditions, the state of the labor market, and the outlook for inflation. Every six weeks, the Committee votes on whether to change the interest rate. The FOMC also releases a statement on the meeting that summarizes its views on the economy and monetary policy. This statement is considered a bellwether for the state of the economy. Investors and analysts closely study the statement for clues about the Fed’s future plans for interest rates. The statement is released three weeks after the meeting and is accompanied by the FOMC minutes three weeks after that.
Why Should I Care about FOMC Minutes?
Investors care about FOMC Minutes because they provide insight into the decision-making process of the FOMC. The Minutes show the thought process behind the Fed’s decisions, and they allow you to better understand what the Fed might do next. As such, the FOMC Minutes are a very important piece of the Fed’s communication puzzle. You can think of the FOMC Minutes as the transcript of a meeting. For example, imagine you are interviewing for a job and you go to the meeting without preparation. You don’t know what questions will be asked, and you don’t know how to respond to those questions. You might not get the job, despite your qualifications. Now imagine you know what questions will be asked and you prepare for those questions ahead of time. You know how to make your case, and you know how to respond to challenging questions. You have a very good chance of getting the job. Similarly, reading the FOMC Minutes in advance of the meeting allows you to understand the questions that will be asked and how the members of the FOMC will respond to those questions. You can anticipate what the Fed will do next and make better investing decisions.
Recent Events That May Have Shaped FOMC Minutes
- US-China Trade War — The US-China trade war has been in the news for a while now. The FOMC minutes may shed more light on how this trade war has affected the US economy and the monetary policy decision making process. — US-Canada Trade War — The US-Canada trade war has been in the news for a while now. The FOMC minutes may shed more light on how this trade war has affected the US economy and the monetary policy decision making process — Brexit — The Brexit negotiations have been in the news for a while now. The FOMC minutes may shed more light on how this Brexit chaos has affected the US economy and the monetary policy decision making process. — US Housing Market — The housing market hit a rough patch in the first quarter of this year. The FOMC minutes may shed more light on how this slowdown in the housing market has affected the US economy and the monetary policy decision making process. — Oil Prices — The price of oil has been volatile. The FOMC minutes may shed more light on how this volatility has affected the US economy and the monetary policy decision making process.
How to Read the FOMC Minutes?
Reading the FOMC Minutes is like reading a transcript of a meeting. You will find the date of the meeting, the participants, and the topic discussed in the minutes. You’ll also find the discussion, followed by a vote. The discussion is important. It provides context for the Fed’s decision and a sense for how the economy is doing. You can use this context to frame your questions for the next Fed meeting. The vote is important, too. A 9–0 vote means all members of the committee voted in favor of the decision. A 8–1 vote means one member voted against the decision. And so on. The vote can provide some insight into the future path of monetary policy.
Bottom line
The FOMC Minutes are the minutes of the Federal Open Market Committee. The FOMC is a group of 12 people who meet to discuss monetary policy once per month. When you read about the FOMC’S decisions on interest rates, those are not just recommendations. The FOMC is voting on something. If you want to know why they are voting on something and what their reasoning is, you need to read their minutes to find out more about it. In this blog post, we’ve answered three questions about the Fed and its meeting minutes. What are the Federal Open Market Committee minutes? Why should you care about them? How can reading the Federal Open Market Committee Minutes help you invest in the stock market wisely?
