Fed Chair Ben Bernanke has decided to release senior officials' short-term interest-rate forecasts, opening a window into the collective mind of the Federal Reserve. The forecasts will be released after the next meeting of the Federal Open Market Committee on January 25. It will include forecasts for the "likely timing" of the first hike of the federal funds target rate and "qualitative information" on the Reserve's war chest of bonds and securities. The Fed likely hopes that by releasing this data, it can encourage much-needed economic growth by guiding investors' expectations and staving off worries about interest-rate changes.
Many economists are cheering the transparency of this move, but some-including those who didn't vote for the change of policy on the board-think that publishing forecasts could confuse instead of educate the public and that the Federal Reserve's forecasts are often no more accurate than its peers'. "You run the risk of every other forecaster, and that is of making an idiot out of yourself," economist Ward McCarthy said to Bloomberg Businessweek. Not only is looking like an idiot not on Bernanke's top list of things to do this year but the transparency may make it harder for the Fed to change course once expectations are set. But for those who value government accountability, it's a good move.
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