The Federal Open Market Committee (FOMC) meets roughly eight times a year to set the target interest rate and signal the path of policy. Because rates are the price of money - the discount rate under every asset - an FOMC decision can reprice stocks, bonds, and the dollar in a single afternoon. Few scheduled events matter more.
Why the market freezes first
In the hours before the announcement, volume and range often compress - nobody wants to be positioned wrong into a binary event. This coil is normal; it is the market holding its breath. Then, at the release and during the press conference, volatility explodes as the entire market repositions at once.
The reaction beats the decision
The rate move itself is often expected and priced in. What moves the tape is the surprise - the guidance, the tone, the dot plot versus what was already baked in. Markets can rally on a hike or fall on a cut, purely based on how the decision compares to expectations. Trading the headline without the context is how people get run over.
On Fed day, the market doesn't trade the decision. It trades the gap between the decision and what was expected.
How to handle it
The initial spike is frequently a fake-out that reverses as the market digests the full message. Whipsaw is the norm. Many disciplined approaches simply respect the event - tightening risk or standing aside through the announcement window rather than guessing the direction of a coin-flip catalyst. The economic calendar tells you when it's coming; discipline decides what you do about it.