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Federal Reserve – Monetary Policy and Latest Market Expectation




The Federal Open Market Committee (FOMC) is a branch of the Federal Reserve System (the Feds). The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirement, while FOMC is responsible for the open market operation. OMO is the purchase and sale of securities by the central banks in the open market to influence money supply.

The board

FOMC consists of 12 members:

  • Seven members of the Board of Governors of the Federal Reserve System.
  • The president of the Federal Reserve Bank of New York
  • Four of the remaining eleven Reserve Bank president

The Board of Governors and the president of Federal Reserve Bank of New York have permanent voting rights while the remaining four Reserve Bank president serve one-year term on a three-year rotating basis. The change of committee membership happens on the first regularly scheduled meeting of the year.

The rotating seats are filled by one bank president from each of the following groups:

  • Atlanta, St. Louis, and Dallas;
  • Boston, Philadelphia, and Richmond;
  • Cleveland and Chicago;
  • Minneapolis, Kansas City, and San Francisco.

2021 FOMC members:

Name Position
Jerome H. Powell Chair of the Federal Reserve Board (FOMC Chair)
John C. Williams President of the New York Federal Reserve Bank (FOMC Vice Chair)
Thomas I. Barkin President of Federal Reserve Bank of Richmond
Raphael W. Bostic President of Federal Reserve Bank of Atlanta
Michelle W. Bowman Board of Governors
Lael Brainard Board of Governors
Richard H. Clarida Board of Governors
Mary C. Daly President of Federal Reserve Bank of San Francisco
Charles L. Evans President of Federal Reserve Bank of Chicago
Randal K. Quarles Board of Governors
Christopher J. Waller Board of Governors
Currently Empty

Alternative Members:

Name Position
James Bullard President of Federal Reserve Bank of St.Louis
Esther L. George President of Federal Reserve Bank of Kansas City
Naureen Hassan First vice president at the Federal Reserve Bank of New York
Loretta J. Mester President of Federal Reserve Bank of Cleveland
Eric Rosengren President of Federal Reserve Bank of Boston

Federal Reserve Bank Rotation:

2022 2023 2024
Members New York
St. Louis
Kansas City
New York
New York
San Francisco
New York
New York
San Francisco
New York
St. Louis
Kansas City

Meeting schedules

The FOMC holds eights meetings per year. The minutes of the meeting are released three weeks after the date of policy decision. The members review economic and financial conditions at the meeting. They also determine the appropriate stance of monetary policy and assess the risk and impact to its long-run goals of price stability and economic growth during the meeting.

Each member provides his/her forecast for each year on:

  • the percent change in gross domestic product adjusted for inflation (real GDP),
  • the unemployment rate,
  • the percent change in the price index for personal consumption expenditures (PCE inflation), and
  • the percent change in the price index for PCE excluding food and energy (core PCE inflation)

Upcoming 2021 FOMC meetings:

Month Date
July 27-28
September 21-22 (meeting with a Summary of Economic Projection)
November 2-3
December 14-15

Their current policy

The FOMC meeting on June 16th shows that the committee aims to support the U.S. economy by promoting its maximum employment and price stability goals. The FOMC committee aims to achieve maximum employment and inflation at the rate of 2 percent over the long run.

The Committee decided to keep the target range for the federal funds rate at 0 to 0.25 percent. FOMC will maintain this rate decision until the labor market reached Committee’s target and inflation has risen of 2 percent and is on the way to moderately exceed 2 percent for some time.

Some other FOMC decisions made on June 16th meeting includes:

  • increase the System Open Market Account holdings of Treasury securities by $80 billion per month and of agency mortgage-backed securities by $40 billion per month.
  • conduct repurchase agreements operations to support effective policy implementation and the smooth functioning of short-term USD funding market.
  • Conduct overnight reserve repurchase agreement operations at an offering rate of 0.05 percent and with a per-counterparty limit of $80 billion per day.

Table Description automatically generated


Federal open market committee,


Federal Open Market Committee (FOMC),


Federal Reserve Press release June 16 2021, https://www.federalreserve.gov/monetarypolicy/files/monetary20210616a1.pdf

Summary of Economic Projections,


The Federal Reserve System (FRS)/ the Feds


The Federal Reserve System is the central bank of the United Sate. The fed aims to promote the effective operation for the U.S. economy and the public interest. It has five major functions including:

  • Conduct the nation’s monetary policy to promote maximum employment, stable price and moderate long-term interest rate.
  • Promotes the stability of the financial system and aims to minimize and contain systemic risks through active monitoring and engagement in the US and aboard.
  • Promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system.
  • Foster payments and settlement system safety and efficiency through services to the banking industry and the government that facilitate USD transaction and payment.
  • promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.

The board

The Fed consists of seven Board of Governors members. A full term is fourteen years. One term begins every two years on the first of February of even-numbered years. A member who serves a full term cannot be reappointed.

The 2120 Board Committees of the Federal Reserve System:

Name Position
Jerome H. Powell Chair
Richard H. Clarida Vice Chair
Randal K. Quarles Vice Chair for Supervision
Michelle W. Bowman Member
Lael Brainard Member
Christopher J. Waller Member

Meeting schedules

The Board of Governors holds meetings regularly, typically every twice a month. The meeting will cover the regulatory, monetary policy and other responsibilities of the central bank.

The most recent monetary policy: February 2021

The COVID-19 pandemic continues to weigh heavily on economic activities and labor market in the U.S. The Federal Reserve will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete.

Some of key points the current monetary policy are summarized below:

A review of the U.S. economy:

Economic activities

  • The level of gross domestic product (GDP) fell a cumulative 10 percent over the first half of 2020, and the measured unemployment rate rose to a high of 14.8 percent in April.

Decisions made:

Interest rate policy:

  • FOMC has held its policy rate near zero and will maintained the target range for the federal funds rate at 0 to 0.25 percent since last March until its target is achieved.

Balance sheet policy:

  • The Federal Reserve will continued to undertake assets purchases to increase its holdings of Treasury securities by $80 billion per month and its holdings of agency mortgage-backed securities by $40 billion per month.
  • The Committee expects these purchases to continue at least at this pace until substantial further progress has been made toward its maximum-employment and price-stability goals.
  • Adjustment will be made if risks emerge could impede the attainment of the Committee’s goals.

Market expectation on the U.S. monetary policy

With the U.S. inflation rise faster than expected and the economy recovery at a stable pace, some market participants become aware of whether the Fed will continue to keep its benchmark short-term rate near zero and continue its massive bond-buying program. The Core PCE, an inflation measure indicator, is at its highest in 29 years at 3.4 percent in May 2021. The current long-term inflation expectation is 2.3 percent.

Three-quarters of the economists surveyed suggest that it was unlikely market expectation for a long-term inflation to rise significantly to over 3 percent by the start of 2022. Most economists expected at least two rate hikes by the end of 2023. Economists’ view about interest rate is align with the Federal Reserve’s own forecasts for when and how quickly rates will have to rise.


The Federal Reserve System


The Fed’s monetary policy


Fed expected to signal start of monetary policy shift debate


Economist predict at least two US interest rate hikes by the end of 2023