Fed to shine light on interest rate plans

The Federal Reserve will begin telling the public what it expects will happen to interest rates in the future, as the central bank continues to beef up its public communications.

Beginning in January, the Fed will include the individual projections of interest rate moves by Fed officials in its package of economic projections, which comes out four times a year.

That collection previously indicated how Fed officials thought the nation's economic growth, unemployment and inflation would fare in the coming months and years; now the Fed wants to add projections about its market-moving interest rates.

According to minutes of the December meeting of the Fed's policy-setting committee released Tuesday, most members agreed that adding their interest rate projections would help the public better understand why the Fed was making certain monetary policy moves. Beginning in January, Fed officials will include their projections for interest rates for the "next few calendar years" and over the longer run, providing markets a previously unseen glimpse into the thinking of the central bank.

The decision marks the latest push within the Fed to provide more information about its moves to the public. The once shadowy institution has made a number of shifts in recent months to bring its rationale more into the open, most notably by offering Fed Chairman Ben Bernanke up for regular press conferences several times a year following Fed decisions. In addition, the Fed recently took the previously unprecedented step of telling the public it expected economic conditions would warrant exceptionally low interest rates through mid-2013.

However, some Fed officials argued that publishing that information could confuse the public. The unnamed officials opposed the move, warning that people could read them as predictions for how interest rates might move in the future, as opposed to their intended purpose, which is to predict how interest rates might react to future projected economic performance. The minutes say most members thought the risk of confusion was "manageable," adding that Fed officials regularly speak in public and would have the opportunity to clarify.

The minutes also reveal that further quantitative easing could be in the works for the Fed, as several members said the economy could "well warrant additional policy accommodation" in the future. However, others argued more buying of government bonds in a bid to lower interest rates would not be very effective and might be "inappropriate."

The minutes also detail a videoconference held by Fed officials at the end of November, where they agreed to lower the cost of swapping dollars for foreign currency in a move aimed at boost ailing European banks. Fed officials thought the move, which was undertaken in conjunction with central banks across the world, "would represent an important demonstration of the commitment of the Federal Reserve ... to support the global financial system." All but one member ultimately agreed to back the move.

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