Fed weighs revamped monetary report as guide to policy

July 9 (Bloomberg) -- Federal Reserve officials are discussing whether to start a quarterly monetary policy report to provide a clearer guide to their economic outlook and the likely course for policy.

“We are talking a lot about it,” Philadelphia Federal Reserve Bank President Charles Plosser said in an interview on July 5. “The question is, can we put it together in a way that is coherent and makes sense and improves our communications?”

Plosser serves on a committee created by Fed Chairman Ben S. Bernanke to consider how to better explain its decisions and policies to the public. Bernanke, who is scheduled to deliver his semi-annual testimony to U.S. lawmakers next week, has established an explicit inflation target and has started giving press conferences in a push to improve transparency.

“They have come a long way, and they need to complete the process,” said Frederic Mishkin, a Columbia Business School professor who served on the Fed board from September 2006 until August 2008. “You want to achieve accountability, but also have markets understand why you are doing what you are doing.”

In another Bernanke innovation, Fed officials publish their forecasts for inflation, growth and unemployment four times a year, as well as their outlook for their key interest rate, albeit anonymously. For all their efforts, investors still have to guess how Fed policies will evolve as new data show the economy moving closer or further from their goals, Mishkin said.

‘Disaggregated’ Information

“We provide a great deal of information, but it is essentially disaggregated in the sense that it’s forecasts of individuals,” Atlanta Fed President Dennis Lockhart said in response to a question last month.

It would be useful if there was “a greater sense about how the committee would react as opposed to individuals,” Lockhart said. “I think that would be progress if we could do that.”

Starting a quarterly report is a “distinct possibility,” St. Louis Fed President James Bullard said in response to a reporter’s question on June 29 after a speech in Little Rock, Arkansas. “There is interest in the Fed in producing something like this.”

The Fed’s main tool for communicating changes in policy is the statement, usually less than two pages long, issued by the Federal Open Market Committee immediately after its eight regular meetings each year.

Last month, the Fed eased policy by extending its Operation Twist program to lengthen the maturities of assets on its balance sheet. The program is intended to boost growth by pushing down long-term borrowing costs.

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