Reuters
The Open Market Committee, led by Fed boss Ben Bernanke, is looking at ways to become even more open, including setting firm, public targets for inflation and unemployment.
By John W. Schoen, Senior Producer
If you?ve ever fancied yourself as a ?Fed watcher? ? one of those analysts who read the tea leaves of the central bank?s next move ? the job is about to get a whole lot easier.
Building on a move toward greater ?transparency? that?s been years in the making,?Fed policymakers?this week will lift the veil on their?interest rate deliberations further than at any time in the central bank's?94-year history. Starting Wednesday, the Fed?will disclose where members of its Federal Open Market Committee?want rates to go?in the future, including guidance on how long they expect to continue the current policy of holding short-term borrowing costs at close to zero.
The move follows a gradual widening of the flow of information that was long cloaked in deep secrecy. For many years, the Fed didn?t even announce its interest rate targets, forcing investors to infer policy changes from price movements in the bond market. Longtime Fed Chairman Alan Greenspan, who discouraged fellow Fed?officials?from speaking about?monetary?policy at all, perfected an obtuse dialect in his public statements that came to be known as "Fedspeak."?
But under Chairman Ben Bernanke, the Fed's?official statements have become clearer, more direct and more detailed. Fed officials have become more outspoken in public appearances. ?The Fed?s glasnost took another major step forward last year with the launch of?Bernanke?s quarterly press conferences.
''Our moves toward greater openness in recent years have made our policies more effective and helped the public understand the Fed's actions better,'' John C. Williams, president of the Federal Reserve Bank of San Francisco, said in a recent speech?at an economics conference in Vancouver, Wash.
To providing greater clarity about the committee?s intentions, ?the Fed will now disclose how many FOMC members expect the federal funds target rate to rise in a given calendar year and where each member expects rate to move after that. Fed officials have even made up a scorecard to help us all keep track.
Promising to keep rates low isn?t without potentially negative?side effects. If potential home buyers, for example, know that mortgage rates are going to hold steady for years, they may be perfectly happy to stay on the sidelines until it becomes clearer that?prices have bottomed. Lowering borrowing costs for businesses may encourage more borrowing to buy new trucks or computer upgrades. But the same low rates squeeze profits for bankers on the other end of those loans.
They also penalize savers, including those in or near retirement who count on interest payments to help pay for their living expenses. Record-low interest rates have left pension fund managers scrambling to make up large shortfalls, as lower returns force them to set aside more cash to meet current and future obligations.
Bernanke's Fed is?is looking at ways to become even more open, including setting firm, public targets for inflation and unemployment. Though central bankers recently have set an informal inflation target of about 2 percent, some members support the idea of making it official. The goal would be to keep a lid on inflation expectations, which can spill over into real inflation if businesses and consumers believe higher prices are inevitable.
Setting a target for unemployment would be tougher; for one thing, inflation and employment policies often conflict. A tight-money, inflation-fighting strategy, for example, typically slows economic growth, raising the unemployment rate. The Fed is also likely reluctant to set an unemployment target at a time when the jobless rate appears to be stubbornly unyielding to recent monetary policy. ?
Whether or not an?inflation target is adopted this week, central bankers?seem?unanimous in support of?fuller disclosure about their decision making. The hope is that?disclosure about the future direction of Fed policy could help amplify the impact.?If investors, businesses and consumers are confident that rates are going remain low, they may be more inclined to borrow and invest, which could help stimulate the economy.
The central bank?s increased?transparency?likely won?t put professional Fed watchers out of work. Publishing targets for interest rates and other economic indicators doesn?t remove the uncertainty inherent in any forecast or prediction, least of all the Fed?s. And it doesn?t mean Fed committee members?will agree on what those targets should be. There?s also a good living to be made parsing the nuance of committee members? now-frequent public statements and shifting opinions about what the Fed should do next.
This week?s meeting, for example, marks an important shift in the composition of the panel, as four of the rotating votes assigned to regional Fed presidents change chairs. Dallas President Richard Fisher, Philadelphia?s Charles Plosser, Chicago's Charles Evans and Minneapolis's Narayana Kocherlakota will no longer cast votes on policy moves. In their place, Cleveland's Sandra Pianalto, Richmond's Jeffrey Lacker, Atlanta's Dennis Lockhart and San Francisco's John Williams get to weigh in.
Though committee members in recent years have become much more open about their views in public, some still prefer to remain somewhat circumspect. Lacker, for example, has said fairly directly that he?doesn?t see enough evidence that it?s time to move further to stimulate the economy. Lockhart, on the other hand, has been less clear, saying he is skeptical about the need for further easing but is "openminded on the subject."
And while Pianalto?s recent statements appear more dovish, she seems happy to sit squarely on the fence.
"While it is true that the federal funds rate has been near zero for some time, some economic policy models indicate that monetary policy should be even more accommodative than it is today,? she told a local chamber of commerce in Wooster, Ohio, this month.
?
heavy d heavy d taser gun patriots vs jets adventureland sean hannity kroy biermann
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.