FOMC

The Fed committee that sets U.S. interest-rate policy, its meetings are the market's biggest scheduled catalysts.

Also known as: Federal Open Market Committee, The Fed

What it is

The FOMC is the Federal Reserve body that sets monetary policy, chiefly the target for the federal funds rate. It meets roughly eight times a year and issues statements, projections, and a press conference. Its decisions steer borrowing costs across the economy.

What it does

FOMC decisions and guidance reprice everything from bonds to growth stocks by shifting rate expectations. Rate-sensitive sectors move most on hawkish or dovish surprises. Investors trade the statement, dot plot, and Chair's tone.

The evidence

Surprise shifts in FOMC guidance have triggered broad, same-day repricing across equities, bonds, and currencies.

Best for

Rate-sensitive groups: XLF, XLRE, XLK; broad SPY, TLT.

Pairs well with

federal-funds-rate, quantitative-tightening, yield-curve

Use cautiously with

It is often the guidance and tone, not the rate move itself, that drives the reaction; trading only the decision misreads it.

Cautions

Much is priced via futures beforehand, so the surprise, not the level, moves markets.