Next Tuesday, the US Federal Reserve will release significantly expanded economic forecasts as part of a major upgrade of its disclosure; a move that will highlight the lack of adequate disclosure by the Reserve Bank of Australia.
After more than a year of study, the changes were announced in a speech by Fed Chairman, Ben Bernanke, in the US overnight.
He said the Fed’s economic projections will be released four times a year, rather than twice a year; the projection horizon will be extended from two years to three years and the forecasts will continue to include the pace of economic growth, the unemployment rate and inflation.
And he said that more details about Fed policymakers’ thinking about future economic conditions and risks to their outlook will accompany the projections, the first of which will be released next Tuesday together with the minutes of the Fed’s October meeting.
Other changes include publishing comparisons with the previous set of forecasts and charts that show the “distribution of participants’ projections and how that distribution has changed,” The Fed will continue to provide the full range and “central tendency” of the forecasts, which excludes the three highest and lowest figures.
The more frequent reports will bring the Fed in line with central banks in Europe, the UK, Sweden and New Zealand, which all publish quarterly projections. The Bank of Japan still puts out a twice-yearly report.
Our own central bank publishes quarterly monetary policy statements; a twice yearly statement on financial stability, which examines the financial markets; and an annual report. There are also twice yearly appearances before a Federal parliamentary Committee (Bernanke makes four appearances before Congressional Committees a year).
In his speech, Mr Bernanke said the changes from next week would offer a “rough guide to the direction of interest rates”.
With the Fed next meeting on 11 December, next Tuesday’s release will offer the best chance for analysts, economists and others to assess the Fed’s most recent reading on the economy three weeks before it meets. With the return of the subprime crisis, there’s a wide expectation the Fed will cut rates, after suggesting after its cut last month (October 31) that it might sit pat.