The FOMC buys securities on the open market, injecting money directly into the system. In function, QE looks fairly similar to open market operations. It is usually only used once the above policy tools have been exhausted – the federal funds rate is near zero, and economic growth is still faltering. Quantitative easing (QE) is an extra measure that the Fed can apply in times of severe financial crisis. So traders and investors around the world will attempt to predict where monetary policy is headed next in each Fed meeting, and adjust their strategies and portfolios accordingly.įind out more about how the FOMC affects interest rates.

Bonds: US bonds are often where the fallout from interest changes is felt most directly.

Indices: Higher rates tend to be bad for shares, while lower rates can be a boon.

Forex: Any interest change will play out on the US dollar, by far the world’s most traded currency.

Here are a few specific markets to watch out for: If the FOMC chooses to raise or lower interest rates, the effects will reverberate across global financial markets. This central rate change will trickle down to other interest rates, including FX rates and bond prices, which can have a big impact on traders.

Using a trio of policy tools, the FOMC can raise or lower the federal funds rate in the US.

The FOMC meeting is usually considered the most important date on any traders’ calendar, for one overriding reason: interest rates.

Next federal reserve meeting 2022