The Federal Open Market committee (FOMC) is the monetary policymaking body of the Federal Reserve System.

This is the group of which Ben Bernanke is Chairman.

Most people can identify Ben Bernanke by face or name, but few understand the role of the FOMC Chairman or his committee with respect to markets and mortgage interest rates.

The Federal Reserve is the central bank of the United States. It was originally created to prevent financial crises by controlling how quickly money flows through banks and businesses. The biggest weapon in the Fed's arsenal to control to the flow of money is the ability to manipulate short-term interest rates.

The FOMC assesses the benefits and risks of adjusting short-term rates during their periodic meetings. The FOMC meets eight times annually.

The Fed has control over two different short-term interest rates.

1. Discount Rate -- The interest rate at which the Fed charges banks to borrow money overnight
2. Fed Funds Rate -- The interest rate at which banks borrow from other banks

Note that the Fed does not control long-term interest rates such as the 10-year treasury note or mortgage rates.

When the Fed changes rates, the effects are felt in other financial markets including foreign exchange and credit which impacts all aspects of the economy.

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.