Fed hopes to clarify its actions to Americans

Scott Tong Dec 12, 2011

Steve Chiotakis: The Federal Reserve’s interest rate committee holds its last meeting of the year tomorrow. And a lot of folks will be parsing through all the economic mumbo-jumbo. Well, it turns out, Fed wants to minimize the parsing and communicate more clearly with the rest of us.

From Washington, here’s Marketplace’s Scott Tong.

Scott Tong: The Fed’s been big on transparency lately. When the economy first softened 3 years ago, it said interest rate would stay low “for some time.” More recently it talked of staying that course til the summer of 2013. Now it’s mulling publicly forecasting future decisions. And talking more openly about its outlook on jobs and inflation.

Strategist Guy LeBas at Janney Montgomery Scott thinks the Fed wants to be more predictable than in years past, when its decisions were fuzzier.

Guy LeBas: If you remember in the late 90s, there were all these shots of Alan Greenspan and how thick his briefcase was, what that implied about the Fed’s future action. But the reality is the Fed has a lot of control over interest rates conditions. So it’s very important to understand what they’re going to do next to understand what the markets are going to do next.

Say you’re a small business owner: the more clear the Fed is, the more you can plan for future borrowing costs. But here’s the risk. The public could interpret the Fed’s public leanings and proclivities as promises, which would make it hard for central bankers to change course when conditions change.

In Washington I’m Scott Tong for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.