Federal Reserve unveils plan to be a little less secretive
The Federal Reserve intends to begin releasing a quarterly interest-rate forecast as a service to investors and to counter critics who say it is not transparent enough.
The Federal Reserve plans to give the public a first-ever view of¬†where Fed officials see interest rates heading in coming months and¬†years.
It won't be a firm predictor of Federal Reserve policy, but economists say the¬†move will help give investors a better glimpse into the thinking of¬†central bankers and their possible course of action.
Starting later this month, a quarterly Federal Reserve summary of economic¬†projections (SEP) report will include information about the outlook¬†from the various particpants on the central bank's policy committee.¬†These forecasts will focus on the so-called federal funds rate, the¬†short-term interest rate for loans among banks that the Federal Reserve¬†determines through its policy.
"The SEP ... will report participants' current projections of the¬†likely timing of the first increase in the target rate given their¬†projections of future economic conditions," the Federal Reserve said in minutes¬†released Tuesday. That would accompany forecasts showing what the¬†officials see as an appropriate federal funds rate for the final
quarter of the year and the next few years.
The move is another step toward greater transparency, a hallmark of¬†the Federal Reserve under Chairman Ben Bernanke.
The bank is under pressure to find ways to better influence the¬†trajectory of a now-weak economy, and to improve its own public image¬†at a time when some politicians are harshly critical of its actions.
Although the statement implies that the range of forecasts by¬†individual Federal Reserve officials will now be visible, some economists¬†cautioned that actual names (like "Ben Bernanke") may not be paired¬†with the predictions.
Still, the new data will provide significant information to Fed¬†watchers, including economists and investors.¬†
The Federal Reserve has been criticized in recent months after issuing a vague¬†statement that it expects short-term interest rates to remain very low¬†through the middle of 2013. While intended to reassure financial¬†markets that the Federal Reserve is determined to spur a tepid recovery forward,¬†it also leaves many wondering when ‚Äď and based on what indicators ‚Äď¬†the policymakers will eventually raise rates.
At best, the move is just a modest boost for the economy, adding a new¬†tool for the imperfect art of US monetary policy. But the move could¬†help the Federal Reserve manage expectations about its policies and their¬†effectiveness, economists say.