The US Federal Reserve (federalreserve.gov) is the de facto central bank of the world. Because the US Dollar is involved in approximately 88% of all global foreign exchange transactions, Fed policy decisions dictate global liquidity conditions and drive major currency movements.
The FOMC Structure and Meetings
The Federal Open Market Committee (FOMC) holds eight regularly scheduled policy meetings per year. The committee consists of 12 voting members: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven Reserve Bank presidents who serve one-year rotating terms.
The Fed operates under a unique statutory dual mandate established by Congress: Maximum Employment and Price Stability (2% inflation). Balancing these two goals determines whether the Fed hikes, holds, or cuts interest rates.
The Dot Plot and Economic Projections
At four of its eight annual meetings (March, June, September, December), the FOMC releases its Summary of Economic Projections (SEP), which includes the famous "Dot Plot".
The Dot Plot displays individual, anonymous projections from each FOMC participant for the target Fed Funds rate at the end of the current year, the next two years, and in the longer run.
• Median Dot Shifts: If the median dot for year-end shifts from 4.6% to 5.1%, it signals that Fed officials collectively anticipate 50 bps of additional rate hikes. The US Dollar surges on the hawkish shift. • Dot Spread: A tight cluster of dots indicates strong committee consensus; a wide dispersion signals policy uncertainty among voting members.
Trading FOMC Announcements
FOMC announcement days follow a standardized two-part event sequence at 14:00 EST and 14:30 EST:
1. 14:00 EST - Policy Statement & Rate Decision: The official statement and target rate are released. If SEP is included, the Dot Plot is published simultaneously. Spreads widen and initial algorithmic spikes occur. 2. 14:30 EST - Press Conference: The Fed Chair holds a 45-minute live Q&A session. Markets frequently reverse direction during the press conference if the Chair's tone (hawkish or dovish) contrasts with the written statement.
Professional Workflow: Do not trade during the initial 14:00 EST release. Wait for the 14:30 EST press conference to conclude and enter on post-news technical setups once the market has established its true directional commitment.