The US Federal Reserve will unveil its eighth monetary policy decision on Oct. 29. after a a two-day review by the central bank's federal open market committee (FOMC). Wall Street has priced in a quarter-point (25 basis points) interest rate cut which will bring the federal funds rate to a range of 3.75%-4.00% amid moderating inflation despite the tariff risk.
The central bank may stop selling government bonds from its massive $6.6 trillion holdings. US Fed chairman Jerome Powell has emphasised labor-market risks over inflation. To be clear, the Fed's monetary policy is what the Fed does to accomplish two key goals mandated by the US Congress:
Promoting maximum employment—which is the highest level of employment or lowest level of unemployment that the economy can sustain while maintaining a stable inflation rate
Promoting stable prices—for the goods and services purchased.
US Fed: How does the FOMC conduct & implement the monetary policy?
The Federal Open Market Committee, or FOMC, is a 12-person group of Federal Reserve System officials that sets the crucial US monetary policy at meetings held throughout the year. The FOMC's monetary policy actions influence interest rates and credit norms, which impacts financial conditions, including economic productivity along with spending and investment decisions by households, communities, and businesses.
The FOMC makes all decisions regarding the appropriate position or stance of monetary policy to help move the economy toward the congressionally mandated goals of maximum employment as well as the price stability. Here's a simple five-point guide on how the rate-setting panel conducts and implements the monetary policy for the economy:
The Federal Reserve is the central bank of the United States. It performs five key functions that serve all Americans and promote the health and stability of the U.S. economy and financial system.
October 27, 2025
To learn more about who we are, visit:https://t.co/8x8QevF53e pic.twitter.com/faXAIswSzD1. Meeting US Fed's 'dual mandate' in practice
The Fed sets the stance of monetary policy to influence short-term interest rates and overall financial conditions with the aim of moving the economy toward maximum employment and stable prices. In this way, the Fed's monetary policy decisions affect the financial lives of all Americans.
It is not just the spending decisions that consumers make, but also the spending decisions of businesses: About what they produce, how many workers they employ, and what investments they make in their operations.
2. Operating independently for Americans
Though it specifies the goals for monetary policy, Congress has also provided the Fed operational independence. This flexibility ensures that monetary policy decisions can be directed toward the longer term, be based on data and objective analysis, and best serve the interests of all Americans.
At the same time, the Fed is accountable to Congress and the American people for its actions. It achieves accountability by being transparent about its policy deliberations and actions through a range of communications.
Twice a year, for example, the Fed Chair goes to Capitol Hill to testify before congressional committees on current economic developments as well as the Fed's actions to promote maximum employment and stable prices.
3. Setting the stance of monetary policy
When necessary, the Fed changes the stance of monetary policy by raising or lowering its target range for the federal funds rate, an interest rate for overnight borrowing by banks. These changes affects the spending decisions of households and businesses and have implications for economic activity, employment, and inflation.
Lowering that target range represents an "easing" of monetary policy because it is accompanied by lower short-term interest rates in financial markets and a loosening in broader financial conditions. This may be needed if the economy is sluggish or inflation is too low.
On the other hand, raising the target range represents a "tightening" of the monetary policy, which raises interest rates and may be necessary if the US economy is overheating or inflation is too high.
WATCH LIVE TODAY: Press conference with #FOMC Chair Powell at 2:30 p.m. ET: https://t.co/1uJrua5qsHhttps://t.co/FJa6TbkDMt pic.twitter.com/Juz7uQ2eKe
October 29, 20254. Data collection and analysis
Teams of economists, analysts, examiners, and other professionals from across the Federal Reserve System continuously gather and analyze data and information from around the US. This information and analysis provides insights on conditions across the US—including at the regional and local level—that are vital to
Formulating effective monetary policy,
Assessing the health of the US economy,
Promoting the stability of our financial system
Ensuring consumer, community, and business voices are heard at Fed.
5. Setting the federal funds rate
The Federal Open Market Committee is the entity that decides on an appropriate monetary policy by setting the target for the federal funds rate. FOMC policymakers rely on a broad range of information in their assessments and deliberations. They analyze the latest economic data and review reports and surveys from consumer, business, and financial market contacts.
Federal Reserve System
The Federal Reserve System includes the Board of Governors, a federal agency located in Washington, D.C., and 12 Federal Reserve Banks around the nation. The 12 Reserve Banks—and their 24 Branches—are the operating arms of the Federal Reserve System. Each Reserve Bank operates within its own particular geographic area, or district, of the United States.
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