Big Ben gets transparent


Federal Reserve chief Ben Bernanke announced a move to provide more public disclosure of the inner workings of the Fed. Instead of issuing economic projections twice a year, the Fed will now put them out four times yearly – and they will provide more detail. The first such report will be issued November 20th, when the Fed releases minutes of its monetary policy making Federal Open Market Committee (FOMC) meeting from October 30-31.

Since 1979 the Fed had issued its projections of economic growth, unemployment, and inflation semiannually in its reports to Congress on monetary policy. From now on, it will compile and release projections four times each year rather than twice a year. In addition, the projection horizon will be extended to three years, from two. FOMC meeting participants will now provide projections for overall personal consumption expenditures (PCE) inflation, as well as for real gross domestic product (GDP) growth, the unemployment rate, and core PCE inflation. Projections of nominal GDP growth will be discontinued. Summaries and explanations of the projections will be published along with the minutes of the FOMC meeting at which they were discussed. These descriptions will provide a fuller discussion of the projections, covering not only the outcomes that most meeting participants see as most likely, but also the risks to the economic outlook and the dispersion of views among policymakers.

"The changes will provide a more-timely insight into the Committee’s outlook, will help households and businesses better understand and anticipate how our policy decisions respond to incoming information, and will enhance our accountability for the decisions we make. But the changes are also evolutionary, in that they build on long-established practices; in that respect, they represent just one more step on the road toward greater transparency at the Federal Reserve. The Committee will continue to look for ways to improve the accountability and public understanding of US monetary policy making," Bernanke said yesterday in a speech to the Cato Institute’s 25th Annual Monetary Conference in Washington, DC.