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