Bernanke: More Transparency To Monetary Policy

Federal Reserve Chairman Ben Bernanke spoke on Fed’s communications at Annual Monetary Conference today. In contrast to his predecessors that praised a secretive atmosphere of FOMC‘s decisions, Bernanke said that transparency and more detailed information will help markets to understands monetary policy better. In this context he announced about a new communications strategy of the Federal Reserve.
This strategy is set to bring more detailed information to market participants on a more timely manner. The following changes will be done to the communication process:

  • Release projections will be compiled four times a year (before — twice a year)
  • Projection horizon will be extended from two to three years
  • FOMC meeting participants will provide projections for PCE inflation, GDP growth, unemployment rate and core PCE inflation
  • Projections of nominal GDP will be discontinued as noninformative
  • Summaries and explanations of these projections will be published along with the minutes releases for the meetings on which they were discussed
  • These explanations will include “risks of the economic outlook and the dispersion of views among policymakers”
  • Bernanke promises more information and more often. The result of this important step may be really surprising. If market participants won’t get lost in the variety of data (which may come very inaccurate with such a long-term details level), they will get into the monetary policy decisions more stepwise with a better understanding of FOMC’s expectations and how these expectations will be transformed into rates cuts and hikes.

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