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Fed Priority of Rates Integrity Prompts Outlook Struggle

Federal Reserve officials are grappling with how they might eventually exit from their plan to keep interest rates low through late 2014 without jolting markets.

Policy makers have relied on communications about their rate expectations to provide additional stimulus after cutting their benchmark rate to near zero in December 2008. Now, they’re seeking to link their commitment more closely to changes in the economic outlook. Giving investors more information about the threshold for a shift would make it easier to change policy, said Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch.