Fed Revises Announcement Policy
WASHINGTON (AP) _ Seeking to clear up confusion in financial markets, the Federal Reserve announced Wednesday it was putting in place a new disclosure policy on the information it will release following its regular deliberations to set interest rates.
Under the new process, which will take effect at the next Fed meeting Feb. 1-2, the central bank will announce at the end of its deliberations how Fed policy-makers view the balance of risks facing the economy.
The new statement will replace the old policy directive, also known as the policy bias, which expressed whether the central bank was leaning toward raising rates or cutting them or holding rates steady.
In the place of the policy directive on rates, the Fed said it will release a statement that attempts to summarize the central bank’s views without linking those views to any specific change in interest rates.
The new statement will be issued after every meeting of the Federal Open Market Committee, the group of Fed board members in Washington and central bank presidents from the Fed’s 12 regional banks, who meet eight times a year to set interest rate policies.
If the Fed is concerned about inflation, the statement will say that ``the committee believes that the risks are weighted toward conditions that may generate heightened inflation pressures in the foreseeable future.″
If those concerns continued, the Fed could be expected to raise interest rates at future meetings.
If the Fed is worried about spreading economic weakness, which it could fight by lowering interest rates to spur increased business activity, the statement would say, ``the committee believes that the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future.″
The FOMC might also adopt a statement saying that future economic risks are equally balanced, the status the Fed is always striving to obtain, meaning that there would be no change in rates either up or down.
Fed Vice Chairman Roger W. Ferguson Jr., who headed the working group that studied the issue, said that the central bank believed the new disclosure policy would help clear up market confusion.
``We have adjusted the language because we found that markets focused too much on the probability of a rate change when the goal of the committee was to convey what risks it perceives in the period ahead,″ Ferguson said in an interview.