The Fed's tools and the meeting cycle

The Federal Reserve is the central bank whose decisions move the most markets, so it is where a macro trader starts. This lesson covers what the Fed can actually do, and the calendar on which it does it.

The tools

Tool	What it is	How often it changes	What it moves most
Federal funds target range	The 25bp range the Fed wants overnight interbank lending to trade in	At scheduled meetings, occasionally between	Everything; the front end of the curve directly
Interest on reserve balances (IORB)	The rate paid to banks on reserves at the Fed; the main lever that keeps fed funds in the range	Alongside target changes	Money-market rates
Overnight reverse repo (ON RRP)	A facility where money funds park cash at the Fed; sets a floor under short rates	Alongside target changes	Bill yields, money-fund flows
Discount window	Emergency lending to banks at a penalty rate	Rarely, in stress	Bank funding, sentiment
Balance sheet (QE / QT)	Buying securities adds reserves and pushes long yields down; letting them run off does the reverse	Announced as a program, adjusted at meetings	Long-end yields, mortgage spreads, liquidity
Forward guidance	Statements about the likely future path of policy	Every meeting and speech	The whole curve, via expectations

The target range gets the headlines, but forward guidance moves more money on most decision days. A hold that comes with "we anticipate further increases" is a hawkish event; a hike that comes with "we are likely at or near the end" is a dovish one. The rate move is one number; the guidance reprices every meeting after it.

The meeting cycle

The Federal Open Market Committee (FOMC) meets eight times a year, roughly every six weeks, on a two-day schedule that ends on a Wednesday. The decision is released at 2:00 p.m. Eastern, the chair's press conference starts at 2:30 p.m., and the minutes come out three weeks later at 2:00 p.m. Eastern.

Four of the eight meetings (March, June, September, December) include the Summary of Economic Projections (SEP), which contains the dot plot. Those meetings tend to be bigger events because the dots reprice the entire path, not just the next step.

Day	Time (ET)	Event	What to expect
Meeting Wed	2:00 pm	Statement and rate decision (plus SEP at quarterly meetings)	Sharp move within seconds; often reversed or extended at 2:30
Meeting Wed	2:30 pm	Chair press conference, roughly 45-60 minutes	Second wave of volatility as Q&A reveals the reaction function
Three weeks later, Wed	2:00 pm	Minutes	Usually smaller, occasionally large when they reveal dissent or new thinking
Ongoing	Various	Speeches by governors and regional presidents	Moves when the speaker is the chair, vice chair, or a swing voter

Between the last speech before a meeting and the decision there is a "blackout period" of about ten days during which Fed officials do not speak publicly. Any repricing during blackout comes from data, not from the Fed.

Key idea: The rate decision is one number released at 2:00 p.m. The guidance, dots and press conference are where the path gets repriced, and the path is what moves the curve.

Who votes

The FOMC has twelve voting members: the seven governors (when all seats are filled), the New York Fed president, and four of the remaining eleven regional presidents on a rotating annual basis. All nineteen participate in discussions and submit dots; only twelve vote. This matters for reading the dot plot (a dot from a non-voter counts as much as one from a voter in the chart) and for reading speeches (a hawkish regional president who does not vote this year is less important than one who does).

What is "priced"

Fed funds futures and the SOFR futures complex trade the expected policy rate at each future meeting. The CME FedWatch tool converts these into probabilities of a hike, hold or cut at each date. Before any decision, look at the probabilities and at how much total easing or tightening is priced over the next year. The decision is then a surprise only relative to that.

A common misread: FedWatch shows 60% probability of a cut, the Fed cuts, and a trader expects a rally. But 60% means the cut was mostly priced. The market reaction depends on the guidance that comes with it and on how the rest of the curve, which had cuts priced for later meetings too, gets adjusted.

Emergency actions

The Fed can act between meetings. Intermeeting cuts (March 2020, twice) and emergency facilities (2008, 2020, the March 2023 bank term funding program) are rare and are almost always associated with market stress rather than routine data. They are not tradeable on a calendar; they are the reason to keep position sizes sane during stress.

Try it: Open the CME FedWatch tool (free on the CME Group site). Write down the probability of each outcome at the next FOMC meeting and the total number of cuts or hikes priced by year-end. Repeat after the next CPI and NFP releases. The change in those numbers is the market's interpretation of the data.

Recap

The Fed's tools are the target range, IORB and ON RRP, the discount window, the balance sheet and forward guidance; guidance often moves markets more than the rate itself.
FOMC meets eight times a year: statement at 2:00 pm ET, press conference at 2:30, minutes three weeks later.
March, June, September and December meetings include the dot plot and tend to be larger events.
Twelve members vote; all nineteen participants submit dots.
Check what is priced (FedWatch, SOFR futures) before every decision; the surprise is relative to that.