Federal Reserve
The Federal Reserve sets US monetary policy. Track current Fed Funds rate, next FOMC meeting date, dot plot updates, statement language and how Fed decisions move the dollar and global risk assets.
The Federal Reserve runs the world's most-watched monetary policy. The Federal Open Market Committee (FOMC) meets 8 times per year to set the Fed Funds target rate. Statement language, the SEP / dot plot, and Chair Powell's press conference drive global FX, rates and equities for weeks.
About the Fed
The Federal Reserve is the central bank of the United States, established in 1913 by the Federal Reserve Act. It operates a federated structure of 12 regional Federal Reserve Banks plus the Board of Governors in Washington DC. Monetary policy is set by the Federal Open Market Committee (FOMC), composed of the 7 Board Governors plus 5 voting Reserve Bank presidents on a rotating basis.
The Fed's dual mandate — maximum employment and stable prices — is unusual among major central banks. Most peers (ECB, BoE, BoJ) target inflation alone, while the Fed weighs unemployment alongside inflation in its reaction function. This makes US monetary policy more responsive to labour market data than other G10 banks and gives NFP outsized market impact.
The current rate-setting tool is the Fed Funds target range, a 25bp-wide band. The effective Fed Funds rate trades within that range on the overnight unsecured market between depository institutions. The Fed manages the rate via reserve interest (IORB) and reverse repo facility (RRP) rates set as a floor.
Mandate & framework
What drives Fed policy
- Core PCE inflation: the Fed's preferred inflation measure, released monthly. Sustained Core PCE above 2.5% YoY supports tighter policy bias.
- Nonfarm Payrolls and unemployment rate: dual mandate's employment leg. NFP misses + rising unemployment open the door to cuts.
- Wages (Average Hourly Earnings, ECI): sticky wages above 4% YoY extend hold cycles even when CPI cools.
- Forward guidance via the Summary of Economic Projections (SEP) / dot plot, released quarterly in March, June, September, December.
- Financial conditions index (FCI): tightening conditions (rising rates, weaker equities, wider credit spreads) substitute for further Fed hikes.
Recent actions
People also ask
What is the Federal Reserve?
The Federal Reserve is the central bank of the United States, founded in 1913. It sets monetary policy via the FOMC, regulates banks, and acts as lender of last resort. The dual mandate of maximum employment and stable prices is unique among major G10 central banks.
When does the Fed meet?
The FOMC meets 8 times per year, typically every 6-7 weeks. Each meeting concludes with a 2-day session ending Wednesday at 19:00 UTC with the policy statement, followed by Chair Powell's press conference at 19:30 UTC. Quarterly meetings include the SEP / dot plot release.
What is the Fed Funds rate?
The Federal Funds target range is the band within which the Fed wants overnight unsecured lending between depository institutions to occur. The effective Fed Funds rate is the actual market-traded rate within the band. The Fed manages the range via reserve interest (IORB) as a floor.
What is the dot plot?
The Summary of Economic Projections (SEP), informally called the dot plot, is published quarterly in March, June, September and December alongside the FOMC statement. It shows each FOMC participant's projection for the Fed Funds rate at year-end and longer run. The median dot is the market's headline read.
How does the Fed affect the dollar?
Hawkish Fed signals (faster hikes, slower cuts, hawkish dots) lift the dollar. Dovish signals weaken it. The 2Y Treasury yield is the cleanest leading indicator — when 2Y yields rise on Fed expectations, DXY rallies; when they fall, DXY weakens.
What is Quantitative Tightening (QT)?
QT is the reverse of QE. The Fed reduces its balance sheet by letting maturing Treasuries and MBS roll off without reinvestment. The current QT pace is $25bn/month for Treasuries and $35bn/month for MBS, slowed from peak of $95bn/month in 2024.
How is Powell different from previous Fed chairs?
Powell (chair since 2018) emphasises data dependency and clear communication via press conferences and speeches. Compared to Yellen (more dovish bias) and Bernanke (academic), Powell has been pragmatic — hawkish through 2022-23 inflation, dovish-pivoting through 2024-26 as inflation cooled.
FX pairs affected by Fed policy
- EUR/USDThe most-traded currency pair in the world. Tracks ECB-Fed policy divergence, eurozone macro and the dollar trade-weighted index.
- USD/JPYCleanest single proxy for the global rate-differential trade. Carry-trade funder. Yen intervention triggers above 155 historically.
- GBP/USDCable. Tracks BoE-Fed differential, UK macro (CPI, wages, GDP) and gilts. The classic risk-on / risk-off proxy for sterling.
- DXYUS Dollar Index. Trade-weighted USD against EUR, JPY, GBP, CAD, SEK, CHF. The cleanest single ticker for the dollar trade.
- USD/CADLoonie. Inverse oil correlation runs high. BoC-Fed divergence + WTI levels drive most of the move.