Understanding Fed Monetary Policy and How It Affects Businesses

Monetary policy is the process of manipulating interest rates and the money supply to manage and control the economy. The Federal Reserve sets monetary policy to promote stable prices and maximum employment. Central banks use monetary policy to manage economic fluctuations and achieve price stability, keeping inflation low and stable.
 

Monetary policy affects businesses in many ways, including:

Interest rates

Higher or lower interest rates often dictate when a business leverages, deleverages, grows or contracts. Monetary policy can impact a business’s ability to borrow money, how much they invest, and how many employees they hire.

Lower interest rates can encourage businesses to invest in new equipment and hire more employees.

Higher interest rates can lead businesses to cut back on investments, including research and development.

Cash flow

Monetary policy can impact a business’s cash flow, affecting its spending decisions.
 

The Federal Open Market Committee

The Federal Reserve holds the Federal Open Market Committee (FOMC) in eight regularly scheduled meetings during each calendar year. At these meetings, the FOMC Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.
 

What is the Summary of Economic Projections?

Four times a year, the Federal Reserve releases a summary of Federal Open Market Committee (FOMC) participants’ projections for GDP growth, unemployment, inflation, and the appropriate policy interest rate. The Summary of Economic Projections also provides information regarding policymakers’ views on the uncertainty and risks pertaining to the outlook. The projections provide information on the values that FOMC participants view as the most likely to prevail in the current year, the subsequent two years, and longer timeframes. The FOMC Chair presents information about these projections in the press conference following the FOMC meeting.
 

FOMC Meetings

As a business, staying in tune with monetary policy is important. Below is the schedule of FOMC Meetings:
 

2024 FOMC Meetings

• December 17-18, 2024*
• November 6-7, 2024
• September 17-18, 2024*

FOMC Meeting Highlights September 19, 2024.: Jerome Powell-led FOMC reduced the policy rate by 50 bps for the first time in four years after leaving the benchmark rate elevated at the 23-year high mark for eight consecutive meetings since July 2023.

*Meeting associated with a Summary of Economic Projections.
 

2025 FOMC Meetings

• January 28-29, 2025
• March 18-19, 2025*
• May 6-7, 2025
• June 17-18, 2025*
• July 29-30, 2025
• September 16-17, 2025*
• October 28-29, 2025
• December 9-10, 2025*

*Meeting associated with a Summary of Economic Projections.
 

2026 FOMC Meetings

• January 27-28, 2026
• March 17-18, 2026*
• April 28-29, 2026
• June 16-17, 2026*
• July 28-29, 2026
• September 15-16, 2026*
• October 27-28, 2026
• December 8-9, 2026*

*Meeting associated with a Summary of Economic Projections.
 

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Information for this article is sourced from the Federal Reserve. This article is for informational purposes only and is not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice on your business objectives.