Application 2006 - Shadow Open Market Committee - University of-2025

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The committee sets monetary policy by specifying the short-term objective for the Feds open market operations, which is usually a target level for the federal funds rate (the rate that commercial banks charge between themselves for overnight loans).
The Shadow Open Market Committee (SOMC) is an independent group of economists, first organized in 1973 by Professors Karl Brunner, from the University of Rochester, and Allan Meltzer, from Carnegie Mellon University, to provide a monetarist alternative to the views on monetary policy and its inflation effects then
It makes all decisions regarding the stance of monetary policy to achieve the goals set by Congress. The FOMCs members are seven representatives of the Fed, the president of the New York Fed, while the other four members are the presidents of other regional Federal Reserve Banks, serving one-year terms.
Key Takeaways The Federal Open Market Committee determines the direction of monetary policy by directing open market operations. The committee is composed of the seven members of the Board of Governors and five Federal Reserve Bank presidents.
For traders, FOMC meetings are a time of particular volatility because any change in federal fund rates can affect a range of economic variables such as short-term interest rates, foreign exchange rates, long-term interest rates, employment output and prices of goods and services.

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The Federal Open Market Committee consists of 12 members: Seven members of the Board of Governors of the Federal Reserve System.
By tradition, the Chair of the FOMC is also the Chair of the Board of Governors. The president of the Federal Reserve Bank of New York and members of the Board of Governors are permanent voting members.

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