Comment: Today is the FOMC meeting

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Michael Nystrom's picture

Today is the FOMC meeting

The Federal Reserve, the nation's central bank, holds 8 Federal Open Market Committee (FOMC) Meetings each year.

At the meetings, they talk about the economy, and they decide if they will change interest rates: Raise them, lower them, or keep them the same.

Everything has a price, and interest rates interest rates are the price you have to pay to borrow money.

Ideally, prices are set in the market, through supply and demand. In the case of money, it is Fed governors who get together and arbitrarily determine what they think the price should be, i.e. what the interest rate should be.

Most people don't think of rates as "the price of money," which is why I used that as a dig in the headline, to point out what is actually going on.

After their decree about the price of money, Bernanke will have a press conference and talk about why the committee to set the price of money did what it did. The markets will try to discern what is going to happen in the future, and prices for stocks, bonds, mortgages, milk, etc. will all readjust in the market, based on the outlook for the price of money going forward.

Hope that helps.

He's the man.