Will the Fed shake the markets?

Members discuss the current state of the economy and projected forecasts and whether the money supply should be tightened or loosened. The FOMC is in charge of open market operations (OMO), which involves the buying and selling of government securities.

The 'federal funds rate’ is determined by the actions of the FOMC and is the rate at which depositories lend overnight to the Fed which influences interest rates and foreign exchange rates, amongst other aspects of the overall economy.

Interest rates and their changes are important to the currency market, as unexpected changes in the tone of comments, not to mention actual moves, have the potential to cause significant volatility across all markets

Potentially, signals that the FOMC is preparing tapering balance sheet purchases could prove to be a very strong signal to the markets and seriously increase their volatility. In that case, the USD could get a boost. If, there are signals that it is too early to discuss a policy change, the USD might come under pressure, thus boosting stock and commodities prices.

Usually, the Fed tries not to provoke a spike in the volatility of the market and delivers its announcements with a balanced commentary.