I don't know if anyone tracks anything that happens at the Fed but I happen to do it religiously. I figure though that this announcement is a big move for the Fed and Bernanke, something that will most likely highlight his career as he proceeds Greenspan.
Bernanke Boosts Fed Transparency
By BRIAN BLACKSTONE
November 14, 2007 9:41 a.m.
WASHINGTON -- Federal Reserve Chairman Ben Bernanke unveiled sweeping changes to the Fed's communications strategy that will double the frequency of policymaker forecasts for economic growth, unemployment and inflation, and extend the forecast horizon to three years.
The new strategy came short of setting explicit numeric targets for inflation, something Mr. Bernanke has long supported. Mr. Bernanke said aspects of inflation targeting, which is practiced by many other central banks, "may be less well suited" to the Fed given its dual inflation and employment objectives.
Still, the changes will give the public considerable more information about the Fed's views on the economy at a time of heightened uncertainty about how the housing slump and credit crunch will play out on Main Street.
The new strategy "will provide a more-timely insight into the [Federal Open Market Committee's] outlook, will help households and businesses better understand and anticipate how our policy decisions respond to incoming information, and will enhance our accountability," Mr. Bernanke said in prepared remarks to the Cato Institute, a Washington think tank.
Starting next week with Tuesday's release of the Oct. 30-31 FOMC meeting minutes, the Fed will release projections for inflation-adjusted gross domestic product growth, unemployment and inflation -- as measured by both the headline and core personal consumption expenditures price index that excludes food and energy -- four times each year.
Until now, the Fed has released those projections semiannually in conjunction with the Fed chairman's twice-yearly economic report to Congress, usually in February and July.
While the Fed will still release projections to Congress in February and July, it will also release them in the minutes of the meetings that occur at the start of the second and fourth quarters of each year.
"Following past practice, we will publish the central tendency and the range of the projections for each variable and each year," Mr. Bernanke said.
The Fed will no longer publish forecasts for nominal GDP growth. It will, however, include forecasts for headline PCE as well as core. Until now, it has only released core PCE forecasts.
"Ultimately, households and businesses care about the overall...rate of inflation," Mr. Bernanke said, thus the Fed "should refer to an overall inflation rate" in assessing whether it has met its long-term objectives. Core inflation is still a useful indicator of the underlying inflation trend in the near term, Mr. Bernanke said.
The Fed also will extend its forecast horizon to three years from two, meaning next week's forecasts will extend through 2010. They will also include a "narrative," that "summarizes participants' views of the major forces shaping the outlook, discusses the sources of risk to that outlook, and describes the dispersion of views among policymakers," he said.
The extra forecast year, Mr. Bernanke said, "will allow the public to infer more about FOMC participants' current judgments about the rate of GDP growth and the unemployment rate that the economy can sustain in the long run."
The new strategy, which Mr. Bernanke called a "work in progress," doesn't include specific numeric targets for the inflation rate, a practice that Mr. Bernanke has long favored and one that is practiced by many other central banks including the European Central Bank and Bank of England.
The Fed has long been assumed to have a comfort zone of 1% to 2% for annual core PCE growth, though it was never official. That index was up 1.8% year-over-year through September.
"Some aspects of inflation targeting may be less well suited to the Federal Reserve's mandate and policy practice," Mr. Bernanke said. The Fed's dual objectives, mandated by Congress, are for stable prices and maximum sustainable employment.
"The [properly measured] long-run inflation rate that best promotes the dual mandate is likely to be low but not zero," Mr. Bernanke said.
Some on Wall Street may infer from the third year in the Fed's forecast horizon what the Fed's implicit goal is for inflation, since the third year probably won't account for near-term forces like changes in energy and commodity prices.
Mr. Bernanke's prepared remarks Wednesday didn't address the economic or policy outlook.
http://www.itsallpolitics.com/component/option,com_smf/Itemid,26/action,post/board,11.0/I think this is a great measure in order to supply more information for the market place so that uncertainty about the economy can be kept at a minimum.
