Federal Reserve System (Fed) Interest Rate Decision

Fed Interest Rate Decision is made eight times a year during the vote among the members of the Federal Open Market Committee (FOMC). The US Federal Reserve determines short-term interest rates, which it will charge on credit and loans to commercial banks.

It is one of the most important events according to the impact on financial markets and US dollar quotes. Interest rates are changed in response to a change in the global economic situation in the country. It can move quotes immediately, strongly and permanently.

The FOMC makes a decision on interest rates based on the inflation level (which is measured according to the consumer price index and consumer spendings), employments (based on the unemployment rate) and national GDP. When the above indicators improve, the Fed can raise rates. Conversely, if economic growth slows down, the Fed may reduce interest rates to stimulate borrowing.

The aim of raising of the Fed's rates is to adjust the inflation level to a target value. Interest rate hike may have a positive effect on dollar quotes, while lowering can be seen as negative for the US dollar. If the rate remains unchanged, the analysts evaluate the number of "for" and "against" votes and discuss statements of voters after the minutes of meeting are published in order to forecast the results of the next meeting.