Fed Accidentally Released Confidential Staff Projections

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Views Of The Federal Reserve As FOMC Meets On Rates

A woman walks past the Marriner S. Eccles Federal Reserve building in Washington D.C.

Photographer: Andrew Harrer/Bloomberg

The Federal Reserve said it inadvertently released staff projections for interest rates and the economy late last month, renewing doubts about its measures to protect confidential information.

The Fed said in a statement Friday in Washington that projections prepared for the June 16-17 Federal Open Market Committee meeting were posted in error on a public website on June 29. Staff projections are normally released with a five-year lag when transcripts of FOMC meetings are published.

The disclosure follows congressional criticism over the Fed’s handling of a leak of internal policy deliberations in 2012, which is being investigated by the House Financial Services Committee.

“It regrettably appears once again that proper internal controls are not in place to safeguard confidential Federal Reserve information,” Jeb Hensarling, the Texas Republican who chairs the House panel, said in an e-mailed statement.

In a separate incident in April 2013, a member of the Fed’s congressional liaison staff accidentally e-mailed a copy of the minutes of an FOMC meeting to more than 100 people, including bank lobbyists and congressional staff, about 19 hours before the minutes were due to be published.

The latest mishap “does raise questions as to what procedures are in place to safeguard confidential information and to make sure there is fair disclosure of market-sensitive data,” said Mark Vitner, senior economist with Wells Fargo Securities in Charlotte, North Carolina.

Yields Fall

Short-term Treasury yields briefly fell after the Fed’s disclosure Friday. The yield on the two-year note slid two basis points, or 0.02 percentage point, to 0.66 percent before rebounding. The yield was at 0.68 percent at 2:54 p.m. in New York.

The Fed said Friday that on June 29, “an updated package of code was posted that inadvertently included three files containing staff economic forecasts that are confidential FOMC information.”

The Fed said it has since “implemented procedures to prevent inadvertent posting” of internal material, said Susan Stawick, a spokeswoman for the central bank who didn’t provide details. “We’re committed to taking further steps if needed,” she said.

The mistake was spotted by a Fed economist on Tuesday, according to a Fed official who spoke on condition of anonymity. It was then brought to the attention of the FOMC’s administrative staff on Wednesday evening, according to Stawick. The matter has been referred to the Fed’s Office of Inspector General.

Rate Outlook

The inadvertent release comes at a sensitive time for markets as investors seek to anticipate the timing of the first increase in the Fed’s benchmark interest rate since 2006. The Fed has said it will probably raise the rate this year, without specifying when.

Late Friday, the Fed issued a statement saying that some of the projections released inadvertently were, in fact, not the staff forecasts provided to policy makers in June. It released a table with the corrected projections.

The staff projections show the federal funds rate at 0.35 percent in the fourth quarter of 2015, up from the current range of zero to 0.25 percent. The Fed said the staff forecasts don’t represent the views of policy makers.

All the same, the release sent analysts scrambling to evaluate the significance of the forecast, with some saying that it implied just one quarter-point rate increase before the end of the year.

Fed officials’ forecasts released in June implied two rate increases in 2015, with the benchmark lending rate finishing the year at 0.625 percent, according to their median estimate.

Eight Meetings

Before each of the eight scheduled yearly meetings of the FOMC, staff economists with expertise in everything from durable-goods spending to inflation construct estimates for gross domestic product, inflation and unemployment.

To avoid recommending an interest-rate path to policy makers, staff use a mechanical approach to derive a fed funds rate for a given period based on the broader outlook, according to the Fed official.

The 0.35 basis-point projection for the fourth quarter of 2015, for example, is the prevailing interest rate for the period, and it isn’t a recommendation for one or two rate increases, the official said.

“Does it change anything for the outlook for the Fed? No, absolutely not,” said Aneta Markowska, chief U.S. economist at Societe Generale SA in New York. “The FOMC already had these when they met in June and they published theirs already, so they took this into account and said we disagree.”

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