The Fed decision

What is being decided

The Federal Open Market Committee meets eight times a year on a published schedule. Each meeting ends with a statement at 2:00 PM Eastern on the second day and a press conference by the Fed chair half an hour later. The decision is the target range for the federal funds rate, the overnight rate banks charge each other, which anchors everything from mortgage rates to what your savings account pays.

The range is a quarter point wide, and the Fed moves it in steps of 25 basis points, which is a quarter of a percentage point. A hold leaves the range where it is. A cut of 25 lowers it a quarter point; a cut of 50 is a bigger, rarer move that signals urgency. Hikes work the same way in the other direction.

The dot plot and the statement

At four meetings a year, in March, June, September and December, the committee also publishes economic projections, including the dot plot: each participant's anonymous view of where the rate should be at the end of this year and the next few. Markets read the median dot as the committee's plan, even though the Fed insists it is not a promise.

The statement changes a few words each meeting, and those words carry weight. A sentence about being attentive to inflation risks, or about the labor market cooling, tells you which way the committee is leaning before it moves.

How the market prices it

Traders bet on the decision through federal funds futures and, more recently, prediction markets. From those prices you can read the implied probability of each outcome. By the week of the meeting, the decision is usually priced at 90 percent or more one way, because the Fed works hard not to surprise markets. That is why the jobs report and CPI matter so much: they are how the odds move between meetings. In Mini Macro the Fed print is a call, not a line: pick the move, and the market-implied odds are shown beside it.