Ever wonder why mortgage rates fluctuate or why saving for a big purchase sometimes feels harder than it should? You can thank, at least in part, a group of policymakers at the U.S. central bank known as the Federal Open Market Committee (or FOMC for short).

This committee’s decisions affect everything from the cost of borrowing, the value of your savings, and even the stability of your job.

Here’s a closer look at what the FOMC does, why, and how it impacts your finances.

What is the Federal Open Market Committee and what does it do?

The Federal Open Market Committee is a key component of the Federal Reserve System, the central bank of the United States.

The Fed monitors and ensures the stability of the U.S. economy by setting the country's monetary policy (actions taken by a central bank to achieve larger economic goals such as maximum employment and stable prices). It controls three major tools of monetary policy: open market operations (OMOs), the discount rate, and reserve requirements.

While the Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, the FOMC is responsible for open market operations, which put simply, refers to the purchase or sale of government securities by the central bank on the open market to regulate the amount of money in the banking system.

The FOMC uses OMOs to achieve its target federal funds rate, the interest rate banks charge each other for ultra-short-term loans, which influences other short- and long-term rates, as well as foreign exchange rates.

The federal funds rate is also a key tool for managing inflation. When the Fed raises interest rates, borrowing money becomes more expensive and the economy slows, bringing down inflation. If the economy needs a boost, the Fed lowers interest rates, which may also contribute to rising prices. The Fed aims to maintain an inflation rate of 2%, which is considered an indicator of a healthy economy.

Who are the Federal Open Market Committee members?

The Federal Open Market Committee consists of 12 members:

• Seven members of the Board of Governors of the Federal Reserve System. These members are appointed by the president of the United States and are confirmed by the Senate. Each governor serves a 14-year term, which is staggered so that one term expires every two years.

• The president of the Federal Reserve Bank of New York.

• Four of the remaining 11 Reserve Bank presidents. These four seats are filled by one Reserve Bank president from each of the following four groups of banks: Boston, Philadelphia, and Richmond; Cleveland and Chicago; Atlanta, St. Louis, and Dallas; and Minneapolis, Kansas City, and San Francisco. Members serve one-year terms on a rotating basis with other Reserve Bank presidents. However, all Reserve Bank presidents attend FOMC meetings, even when they are not designated voting members.

Read more: How much control does the president have over the Fed and interest rates?

2024 Committee Members

• Jerome H. Powell, Board of Governors, Chair

• John C. Williams, New York, Vice Chair

• Thomas I. Barkin, Richmond

• Michael S. Barr, Board of Governors

• Raphael W. Bostic, Atlanta

• Michelle W. Bowman, Board of Governors

• Lisa D. Cook, Board of Governors

• Mary C. Daly, San Francisco

• Beth M. Hammack, Cleveland

• Philip N. Jefferson, Board of Governors

• Adriana D. Kugler, Board of Governors

• Christopher J. Waller, Board of Governors

Alternate Members

• Susan M. Collins, Boston

• Austan D. Goolsbee, Chicago

• Alberto G. Musalem, St. Louis

• Jeffrey R. Schmid, Kansas City

• Sushmita Shukla, First Vice President, New York

The FOMC has eight schedules meetings per year, usually at the Board Room at the Eccles Building in Washington, D.C. The topics the FOMC discusses include:

• The outlook for the American economy

• The outlook for foreign economies

• The outlook for regions in America; the Reserve Bank presidents in particular will talk about conditions in their districts, as well as discuss their views on the national economy.

Following these discussions, designated FOMC members vote on the appropriate course of action, including whether to raise, lower, or maintain the federal funds rate.

How the FOMC’s actions impact you

The FOMC makes numerous impactful decisions, but what tends to get the most attention is if and when it will adjust the federal funds rate.

When the Fed increases its target rate, the interest rates on loans and credit cards also go up. In other words, it becomes more expensive to borrow money. But rising interest rates aren’t all bad — it also means you’ll ultimately earn higher rates on your deposit accounts, including high-yield savings accounts and certificates of deposit (CDs).

Read more: Should you open a savings account or CD before the Fed's next meeting?

The FOMC's actions influence your cost of living as well, since the federal funds rate is a key tool for managing inflation. For example, when inflation is high, your money loses purchasing power over time.

These policy decisions also have a ripple effect through the economy, influencing (albeit less directly) job stability, stock market returns, home prices, and more.

Read more: A look at the federal funds rate over the past 50 years: How has it changed?

Frequently asked questions

What is the difference between the Fed and the FOMC?

The Fed is short for the Federal Reserve System, and it’s the central bank of the United States. The FOMC is a committee within the Fed.

How does the FOMC affect the market?

In theory, decisions by the FOMC don’t affect the stock market. In reality, however, the FOMC influences the market all the time. Investors often buy or sell stocks based on what they believe the FOMC will do with interest rates; when it costs less to borrow money, companies can then borrow more and invest in their businesses, which often leads to more profits in the long run. So investors (usually) like to see interest rates lowered, or at least remain unchanged.

How many times a year does the FOMC meet?

The FOMC schedules eight meetings a year. These meetings happen about every six weeks, though the committee can hold additional meetings to respond to urgent economic matters, if necessary.