The Federal Reserve (Fed), is the central banking system of the United States and are in charge of guiding economic policy announcements, public statements, and U.S. Monetary policy. The FOMC Report is one of the few of the most highly anticipated trading events of the year.
Since the Fed is in charge of buying and selling U.S. government securities and setting interest rates. They are dual mandated and expected to achieve both stable prices and maximum employment. As a result, public statements are closely watched by traders, and even the slightest changes in policy and federal fund rates can create extreme market moving events.
The FOMC
The Federal Open Market Committee meets eight times per year to review economic and financial conditions, monetary policy changes and assess price stability and employment output. Every six weeks these meetings take place. Four out of the eight meetings feature a Summary of Economic Projections followed by a press conference by the chair where the minutes (decide whether to raise or lower interest rates) are released three weeks after the date of the policy decisions.
For speculators (traders), FOMC meetings are a time when the markets can get volatile because any change in rates can affect the economic variables such as foreign exchange rates, short term interest rates, prices of goods and services.
Trading on the Fed’s Decisions
A wealth of data is provided by the Feds can influence the markets. Most traders study the post-meeting press releases, which highlights the state of the economy. Traders also pay attention to speeches, press releases and other public appearances by Fed members that occur between meetings.
Trading before and after an FOMC meeting announcements can be risky, but with a little insight and preparation, it is an event that offers plenty of opportunities for retail traders to trade throughout the year.
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