Federal Open Market Committee (FOMC)

The Federal Open Market Committee is the body inside the US Federal Reserve that decides American monetary policy. It meets eight times a year to set the target range for the federal funds rate and to steer the broader path of policy, including bond purchases or sales.

How it works

The FOMC weighs US inflation and employment data, then votes on interest rates. When it raises rates to cool inflation, borrowing becomes costlier worldwide; when it cuts to support growth, money becomes cheaper. After each meeting, the Fed releases a statement, projections, and a press conference, all parsed obsessively by global markets.

Its decisions ripple far beyond America because the dollar is the world's reserve currency and US Treasuries are the global benchmark for the risk-free rate.

In India

Indian markets watch the FOMC almost as closely as they watch the RBI. When the Fed raises rates, US assets become more attractive, and foreign portfolio investors (FPIs) often pull money out of emerging markets like India. That can pressure the rupee, push up bond yields, and weigh on the Nifty and Sensex.

The reverse also holds: when the Fed turns dovish and cuts rates, capital tends to flow back into Indian equities and debt, supporting markets and the currency. The RBI's own MPC must factor in Fed moves, since a wide rate gap can drive currency volatility and capital flight.

Why it matters

For Indian investors, FOMC outcomes affect FPI flows, the rupee, import costs, and the value of mutual fund portfolios, especially funds holding rate-sensitive stocks or with global exposure. A surprise Fed decision can move Indian markets sharply the very next morning.

Common mistakes

Many Indian investors ignore the Fed entirely, assuming only the RBI matters at home. In a globally connected market that is a mistake, US monetary policy is a major driver of foreign flows into India. The opposite error is overreacting to every FOMC headline; long-term investors should note the trend without trading on each meeting.