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KAI RYSSDAL: While it might seem as if we’re telling you all the time that “Ben Bernanke said this,” or “Ben Bernanke said that,” the truth is, the Federal Reserve only offers its official economic forecasts twice a year.
Well as of today, Get ready for double the fun — our senior business correspondent Bob Moon’s with us to explain. Hi Bob.
Bob Moon: Hello, Kai.
You know, we hear from and about the Fed all the time — at least it certainly seems like we do, especially these days with the credit crunch and the economy sort of teetering on whatever it’s teetering on the edge of. Given all that, how significant is what he had to say today?
Moon: Well, it may seem that we hear a lot from him, but I think you and I both know that deciphering the language that these monetary policy makers use is something like trying to decipher the remains in the bottom of a tea cup. Maybe the best way to explain this is to compare the way the Federal Reserve has traditionally operated — and here’s a clip that pretty much sums that up:
Wizard of Oz clip:
“Pay no attention to that man behind the curtain! The great Oz has spoken!”
We’re talking about an institution here that’s largely preferred to operate within an aura of secrecy. The former Fed chairman, Alan Greenspan, pulled back the curtain just a little bit… But it’s a lot like Dorothy here, in that it’s left a lot of people feeling short-changed, especially the investors on Wall Street.
RYSSDAL: It’s funny to think of Alan Greenspan having pulled back the curtain, given the opaqueness of his language. What are we going to know, now, with these new Fed policies?
Moon: Well, Bernanke pulled the drape cord even farther back today when he delivered an address before the Cato Institute:
Bernanke: Improving the public’s understanding of the Central Bank’s objectives and policy strategies reduces economic and financial uncertainty, and thereby allows businesses and households to make more informed decisions.
So Bernanke and his policy makers have decided the Fed’s going to issue detailed reports four times a year, and not just twice, on the outlook for the health of the economy. And they’re also promising detail that’s really unprecedented from the Fed. These projections are going to look even farther and farther into the future, assessing the business environment three years out, and not just two. And they’re going to be much more specific about economic growth, about unemployment, inflation and whatever risks that they might be concerned about.
RYSSDAL: Somehow, the Oz guy is just much more fun. When is this going to start?
Moon: Next Tuesday — the Fed is scheduled to release the minutes of the last meeting that the policy makers held when they lowered interest rates. Well, this next, expanded set of projections is supposed to be released at that same time.
RYSSDAL: Let me get a little bit detailed on you, here, and ask you about something that might seem wonky but really is kind of important: the feeling of the Federal Reserve about setting inflation targets. There has been some questions about whether or not Bernanke wants to do that… Did he?
Moon: Well, that would set a boundary, if you will, for acceptable inflation limits. Bernanke hinted that the Fed is still considering that, but he suggested that setting that target isn’t going to be easy. For now, it seems that they’re not going to get specific about what that limit should be.
RYSSDAL: So, opening up, but only a little bit, right?
Moon: That’s right.
RYSSDAL: The $64,000 Question, of course, is how Wall Street is reacting… What did they have to say?
Moon: Generally positive reviews — as we all say, Wall Street hates surprises just about more than anything else. And in the academic world, the experts are saying this can only contribute to the country’s financial stability.
RYSSDAL: Bob Moon, our senior business correspondent — Thank you, Bob.
Moon: Thanks, Kai.
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