Fed Releases Format for Charts on Forecasts by FOMC for Main Interest Rate
Jan. 20 (Bloomberg) -- Allan Meltzer, a professor at Carnegie Mellon University, talks about Federal Reserve monetary policy. Meltzer also discusses the value of capitalism versus other economic systems and the Taylor Rule formula. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." John Taylor, an economics professor at Stanford University, also speaks. (Source: Bloomberg)
The Federal Reserve released blank templates showing the format of the central bank’s forecasts for the benchmark interest rate, which will be provided to the public for the first time on Jan. 25.
The Fed said it will offer two charts along with the forecasts, according to a statement today in Washington. The first chart will use shaded bars to show in which year participants in the Federal Open Market Committee project that the central bank will first raise interest rates.
The second chart will show projections from each participant for the appropriate federal funds rate target at the end of the next three years and the longer run. The chart will indicate how quickly the central bank expects rates to rise once they are no longer in the range of zero to 0.25 percent.
The projections aren’t specific about the timing of a rate change, only indicating the year of such a move, said Michael Pond, managing director at Barclays Capital Inc. in New York.
“The thing I am surprised at is that it is not more granular,” he said. “If the first rate hike is 2014, is it January 2014 or December 2014?”
Minutes from the FOMC’s December meeting said that the Fed would also provide an “accompanying narrative” providing “qualitative information” regarding Fed officials’ expectations for the central bank’s $2.92 trillion balance sheet. That information will be provided three weeks later in minutes of the meeting. The minutes of the January meeting are scheduled to be released Feb. 15.
‘Future Path’
“Appropriate monetary policy, by definition, is the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy” the central bank’s dual mandate for maximum employment and stable prices, the Fed said in an explanatory note released with the templates.
By releasing their forecasts, central bankers may alter expectations for the timing of the first increase in the benchmark interest rate, which has been kept near zero since December 2008. Fed officials repeated their view last month that economic conditions would warrant “exceptionally low levels for the federal funds rate at least through mid-2013.”
To contact the reporters on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net
Craig Torres in Washington at ctorres3@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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