How to read an FOMC meeting

What the FOMC is and when it meets

The FOMC is the Federal Reserve's policy-setting committee. It meets eight times a year to set the target range for the federal funds rate, the rate banks charge each other for overnight loans. That rate influences borrowing costs across the economy.

The Fed works under a dual mandate: maximum employment and stable prices. It defines stable prices as 2% inflation over the longer run. Nearly everything in an FOMC release can be read as the Committee explaining how it sees progress toward those two goals.

• Statement and rate decision: 2:00 PM ET on the final day of the meeting
• Chair's press conference: 2:30 PM ET
• Summary of Economic Projections, including the dot plot: at four of the eight meetings
• Minutes: released three weeks after the decision

The rate decision versus expectations

The headline is whether the Committee raised, lowered or held its target range. But markets usually go into the meeting with a strong expectation already built into prices, often visible in fed funds futures, which reflect where traders collectively think rates are headed.

Because of this, a widely expected decision can produce little reaction on its own. When the decision differs from what was priced in, markets have tended to move more sharply. A useful habit is to ask not only what the Fed did, but how that compares with what the market expected. Exceptions are common, and the rest of the release can outweigh the decision.

Reading the statement for changes in wording

The statement is a short document describing the economy, the policy decision and the outlook. It changes little from meeting to meeting, which is exactly why small edits matter. A removed phrase or a new adjective can signal a shift in the Committee's thinking.

Many traders compare the new statement side by side with the previous one. Watch how inflation and the labor market are described, any language about future adjustments, and the vote. Dissents, when members vote against the decision, can hint at debate inside the Committee.

• Is inflation described differently than last time?
• Has the description of jobs or growth gotten stronger or weaker?
• Is there new or removed language about the path of future policy?
• Who dissented, and in which direction?

The press conference

At 2:30 PM ET the Fed Chair reads an opening statement and takes questions from reporters. This is where the Committee's reasoning gets fleshed out, and where unscripted answers can add or take away from the message in the written statement.

Markets sometimes move one way after the statement and another during the press conference. Listen for whether the Chair sounds more concerned about inflation or about employment, how much flexibility they signal, and whether answers confirm or soften the statement's tone. Tone is subjective, so it can help to note specific phrases rather than overall impressions.

The dot plot and economic projections

At four meetings a year, the Fed publishes the Summary of Economic Projections (SEP). It includes each participant's estimates for growth, unemployment, inflation and the appropriate policy rate over the next few years and the longer run.

The dot plot is a chart where each dot shows one participant's view of where the policy rate should be at the end of each year. It is not a promise or a committee forecast. Markets tend to focus on how the median dot and the spread of dots have shifted from the previous projections, and how that compares with market pricing.

• Did the median rate path move up or down since the last SEP?
• Are the dots tightly clustered or widely spread?
• Did inflation or unemployment projections change meaningfully?

The minutes, three weeks later

The minutes are a more detailed summary of the discussion at the meeting, released three weeks after the decision. They do not name individual speakers, but they describe how many participants held certain views, using terms like "a few," "several" or "many."

By the time the minutes arrive, the market has already absorbed the decision and press conference, and new data may have changed the picture. Even so, the minutes can move markets when they reveal a debate or concern that was not obvious at the time, such as broader support for a policy change than the statement suggested.

Key terms

FOMC

The Federal Open Market Committee, the Federal Reserve body that sets U.S. monetary policy, including the federal funds rate target.

Federal funds rate

The interest rate banks charge each other for overnight loans, which the FOMC targets as a range.

Dual mandate

The Fed's two goals of maximum employment and stable prices.

Statement

The short written release at 2:00 PM ET announcing the decision and describing the Committee's view of the economy.

Dot plot

A chart in the Summary of Economic Projections showing each participant's view of the appropriate policy rate at future year-ends.

Summary of Economic Projections (SEP)

Participants' forecasts for growth, unemployment, inflation and the policy rate, released at four meetings a year.

Minutes

A detailed, anonymous summary of the meeting's discussion, published three weeks after the decision.

Hawkish / dovish

Hawkish describes leaning toward tighter policy to fight inflation, while dovish describes leaning toward easier policy to support growth and jobs.