Keeping secrets?

Photographer: Win McNamee/Getty Images

When the Fed Meets, We Need to Know

Narayana Kocherlakota is a Bloomberg View columnist. He is a professor of economics at the University of Rochester and was president of the Federal Reserve Bank of Minneapolis from 2009 to 2015.
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Officials at the U.S. Federal Reserve, including Chair Janet Yellen, have been sending unusually strong signals that they intend to raise interest rates at their next scheduled policy-making meeting later this month.

Why the sudden certainty? One possibility is that they have already met secretly via video conference.

The Federal Open Market Committee, which sets the central bank’s monetary policy, holds eight planned meetings per year in Washington. The dates are announced publicly at least six months in advance -- a schedule that Fed watchers in the media and the markets follow closely.

Occasionally, though, the chair brings the committee together for previously unscheduled video conference meetings. Sometimes these meetings are held to discuss emergency situations, such as the European debt crisis of 2010 or the U.S. debt ceiling standoff of 2011.

But the unscheduled meetings can serve another purpose: allowing officials to have a deeper conversation about key policy issues. In October 2010, Chairman Ben Bernanke held such a meeting to discuss quantitative easing -- a possibility that became reality a few weeks later. Yellen’s first meeting as Chair, in March 2014, was also unscheduled. Officials focused on whether to keep providing specific quantitative guidance regarding the future path of Fed’s target rate.

As a member of the committee, I found these kinds of unscheduled deep dives into policy very useful. Because committee members are spread out across the country, they don’t spend as much time together as do similar monetary-policy committees in other countries. The extra meetings provide a great way to establish a better collective understanding of issues that can be very complex.

I do, however, find the secrecy of the meetings troubling. The Fed reveals that they have taken place only about three weeks after the next scheduled meeting, when minutes are released. As a result, the public didn’t find out about the March 4, 2014, video conference meeting until April 9. (Full transcripts for the unscheduled meetings are released according to the usual practice, after a lag of five years or so.)

In my view, it would be better to release a short statement immediately after any unscheduled meeting. Often, something like “The committee met by video conference to discuss issues related to monetary policy” would suffice. More or less detail could be provided as necessary.

So, has the committee already met? The members’ unusual degree of collective certitude suggests that they might have. But I’m now a Fed outsider and have no way of knowing for sure. That seems like a situation in need of fixing.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Narayana Kocherlakota at nkocherlako1@bloomberg.net

To contact the editor responsible for this story:
Mark Whitehouse at mwhitehouse1@bloomberg.net