Analysis | The FOMC Cycle
- Edward von der Schmidt
- Mar 23
- 7 min read
The Federal Reserve's meeting-to-meeting process is not opaque or secret, even if the deliberations themselves are. Monetary policy decisions and communications generally follow a predictable cadence that offers reliable, real-time insight into the Fed's perspective and posture. In its efforts to communicate policy effectively, the central bank actively tries to help the public separate signal from the noise. By following the FOMC cycle, you will gain a better understanding of the economy, monetary policy, and the Federal Reserve.
23 MAR 2025
EDWARD VON DER SCHMIDT
| Fedspeak
| Blackout
| Sources
The Decision
"Our undertaking at all times is that we'll make our decisions based on the incoming data, the evolving outlook, and the balance of risks - and only on that."
- Jerome Powell (July 15, 2024)
On a Wednesday at 2pm Eastern Time, the Federal Reserve announces its latest policy decision. Arguably one of the most consequential events in financial markets, the recurring statement release marks both the end and beginning of the typical Federal Open Markets Committee (FOMC) cycle. Meetings and statements need not be planned or announced in advance, but eight regular meetings are scheduled every year. Every six or seven weeks (alternating), FOMC participants formally convene for two days to discuss economic and financial developments and to enact a monetary policy consensus.
The FOMC is comprised of 19 members: the Board of Governors (7) and the regional Bank Presidents (12), all of whom are supported by dedicated staff. The Governors of the Federal Reserve Board, the President of the Federal Reserve Bank of New York, and a rotating 4 of the remaining 11 regional Bank Presidents vote at any given meeting (12 voters total). This vote includes the setting of the Fed's principle policy tool: the target range for the federal funds rate. The latter represents the overnight cost of borrowing for deposits held among financial institutions at the Federal Reserve. As a measure of the opportunity cost of US dollars, it is also the interest rate underlying the valuation of nearly all dollar-denominated assets.
By manipulating this overnight policy rate, the Fed may facilitate looser or tighter financial conditions - the relative ease or difficulty with which financing may be obtained and deployed to effect economic activity. Though the effects are indirect and complex, lowering the cost of overnight borrowing tends to loosen or ease financial conditions whereas raising policy rates tends to tighten or restrict them. In this manner, changes to the baseline fed funds rate broadly influence economic activity, employment, and inflation - with oft-repeated "long and variable" lags. The simplicity of this instrument belies a tremendous amount of supporting research, analysis, and planning that go into charting a course for monetary policy and the domestic economy. Crucially, the transmission of monetary policy also depends on effectively communicating these decisions and their rationale to the public. Enter the statement, supplementary materials, and the post-meeting press conference.
Uncertainty regarding the nature and context of monetary policy can undermine its effectiveness. To that end, the Federal Reserve issues a short statement at the conclusion of each meeting that outlines the Committee's assessment of the economy and financial conditions in addition to any monetary policy decisions. The statement clearly articulates actions to be implemented in the inter-meeting period; an implementation note may detail specifics. The statement may also include forward guidance, or language hinting at the anticipated thrust or conditionality of future policy. Half an hour after the statement release, the Chair of the Federal Reserve delivers prepared remarks discussing the context and reasoning behind the FOMC's latest decision. A question-and-answer session with the press follows, offering further insight into the Committee and Chair's thinking.
Every March, June, September, and December, the Fed also releases a quarterly Summary of Economic Projections (SEP) along with its post-meeting statement. These projections include a tabulation of individual forecasts from each participant regarding economic growth, unemployment, inflation, and the expected policy rate path for the next three years and beyond. The SEP also includes participants' assessments of relative forecast uncertainty and risks to their projections. While the SEP provide a contemporaneous window into the Fed's framing and are most useful in the weeks immediately following their publication, you should interpret the projections with care. They only represent each individual participant's baseline forecast of a single, most likely set of outcomes derived from information available at the time - to the exclusion of other possible or even probable paths and without consideration of forthcoming data. The SEP provides color and does not imply any policy consensus.
Fedspeak
We're not trying to hide our decisions from the public [...] in modern monetary policy, we want the public to understand how we think.
Jerome Powell (February 7, 2023)
In the weeks following the FOMC meeting, Federal Reserve officials issue a bevy of communications to the public: speeches, essays, interviews, seminars, town halls, and the like. This discourse is often referred to colloquially as 'Fedspeak'. Policymakers use this engagement to enhance signaling of the Fed's policy stance and to offer additional perspective relevant to their decision-making process. Early in the cycle, such Fedspeak tends to reinforce ideas outlined at the previous meeting as officials simultaneously assess incoming data, the evolving outlook, the balance of risks, and how their communications have been received and interpreted.
Published three weeks after the meeting, the FOMC minutes may be the most valuable communication in the cycle and merit your attention. The minutes provide a detailed summary of the discussions held by the FOMC, including staff and participants' assessments of the economy and monetary policy. While the minutes are bound by the actual discussions that take place (which are transcribed and released with a five-year delay), they entail considerable editorial discretion. The Fed chooses which aspects of the discussion to emphasize, to what degree, and in what fashion. This release coincides with the Chair's contemplation of communication changes to better reflect the central bank's intended messaging; the FOMC minutes represent the first practical opportunity to do so. Fine-tuning in the minutes may augur subtle communication shifts leading into the next meeting or hammer home messages that markets appear to have missed.
Regional Input
Staring at data is great. You need to have a story.
- Jerome Powell (February 7, 2023)
There are twelve Federal Reserve Banks with their own degree of independence: Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis, New York, Philadelphia, Richmond, San Francisco, and St. Louis. The Federal Reserve conducts its Open Market Operations through the Federal Reserve Bank of New York, which is charged with implementing monetary policy and whose President thus has a permanent vote on the FOMC. The remaining Banks are allotted four votes, which are rotated annually among their Presidents (who otherwise serve as alternates). The Federal Reserve System comprises varied regional economies that offer diverse experiences and perspectives of monetary and economic phenomena.
The Banks cultivate relationships with and collect ongoing feedback from a variety of stakeholders in their districts. This outreach motivates research inquiries, produces valuable survey data, and constructs influential narratives based on trends and developments observed at the regional level that may not be apparent in national aggregates. These insights are unique to the Federal Reserve and can influence not just Bank staff and Presidents but the Committee at large. Two weeks before every FOMC (four or five weeks after the last meeting), the Federal Reserve releases a compilation of this regional feedback in a document known as the Beige Book. The Beige Book establishes important economic context and is published just before officials are restricted from communicating with the public ahead of the next meeting.
Blackout
"We're absolutely going to take into account data - important data - that comes in during the blackout period."
- Jerome Powell (September 30, 2024)
All public policy communications are restricted in the 10 days that precede the FOMC. This affords an opportunity to prepare for the meeting without sending premature or unintended signals before discussions have been held or a consensus has been reached. While we may not hear policymakers opine on data released or other important developments occurring during the media blackout, the Committee considers all information germane to its policy decisions - even data disseminated during the meeting. Note that the blackout ends with the release of the FOMC statement and the Chair's press conference.
During this pre-meeting blackout, participants consult staff, briefings, and research memos in order to prepare. Presidents are charged with gathering information from their districts in order to convey pertinent regional narratives to the Committee at large. Central to the policy discussion, Federal Reserve research staff prepare and distribute the Teal Book. The two-part briefing discusses economic and financial conditions in depth and outlines a range of probable scenarios, identifiable risks, and potential policy responses. This critical document is publicly released on a five-year delay in conjunction with the meeting transcripts; together they offer unparalleled if dated insight into FOMC mechanics.
The Powell Process
"Ideally what we discuss in the meeting is kind of a synthesis of all of the views and information that we're all sharing with each other. But you should just assume though that decisions don't get made until the meeting."
- Jerome Powell (September 30, 2024)
The exact manner in which the FOMC meeting is conducted is left to the discretion of the Chair of the Federal Reserve Board of Governors. The current Chair, Jerome Powell, has shared his process publicly on several occasions. Chair Powell consults each FOMC participant in the week before the meeting to discuss their analysis of the economy, policy views, and thoughts on the path forward. By this time, everyone has received and reviewed internal briefings and drafted their forecasts for the SEP (if applicable). On a typical Friday before the FOMC, Powell speaks with each of the 11 voters individually in order to synthesize Committee views and attempt to determine an emerging consensus before the FOMC convenes.
On Tuesday, the FOMC begins with staff presentations and participant discussions concerning the economy, financial conditions, and other important context. The afternoon session culminates with each participant offering their assessment of the economy; the Chair shares his views last. A Committee dinner follows Tuesday evening. On Wednesday morning, the Chair proposes a course of action for monetary policy based on his conversations with individual participants and discussions among the Committee and staff. This proposal kicks off deliberations among the FOMC before a vote is held with regard to any policy decisions and official communications, usually before noon.
At 2pm, the FOMC statement is released and the cycle begins anew.
Sources
Board of Governors of the Federal Reserve System - Monetary Policy
Hon. Jerome Powell, Chair of the Board of Governors of the Federal Reserve System (February 7, 2023)
The Honorable Jerome H. Powell (July 15, 2024)
Fed Chair Jerome Powell speaks at National Association for Business Economics (September 30, 2024)