ho ho ho don't say it! not gonna quit posting it ...
are these guys self-important or what????
biz.yahoo.com
Fed bias release to signal likely rate move-Boehne
By Marjorie Olster
NEW YORK, March 17 (Reuters) - The Federal Reserve will disclose changes in its monetary policy ''bias'' when those changes
are likely to foreshadow a move in interest rates, Philadelphia Fed President Edward Boehne said.
In an interview with Reuters on Tuesday, Boehne explained the recent change in the way the Fed announces its policy directive,
commonly referred to as the bias. Boehne is a voting member of the Fed's policymaking arm, the Federal Open Market
Committee (FOMC).
The bias is a gray area in Fed legislation which indicates which direction central bankers are leaning toward for a potential change in the federal funds rate.
The FOMC said last month it will begin announcing some changes in the bias on an irregular basis.
The FOMC said it will announce changes in the directive ''only when it seemed important for the public to be aware of an important shift in the members' views''.
The changes would be disclosed on an infrequent basis and only when the FOMC did not change rates at the same meeting the bias was changed, the Fed said.
Asked if the FOMC intended to announce those changes in bias which it thought were more likely to lead to a rate move, Boehne said: ''I think, or (those changes)
that the committee feels strongly enough that the public needs to know what the bias is.''
Critics of the Fed have long pressed for central bankers to be more open about how they make decisions, what they decide and what they intend to do.
U.S. central bankers are also frequently chided, when they do try to communicate, for speaking in overly complex and opaque terms difficult for ordinary people to
understand.
A number of Fed watchers said last month's announcement about the new bias policy caused more confusion than clarity in financial markets, raising concerns that it
would add uncertainty about the Fed's intentions and create more volatility.
''I think the issue is if the bias would be helpful information to the markets, it would be a good idea to release it,'' said Boehne.
''If it is just basically a kind of internal sense that may not turn out to be reality, is that just going to cause a lot of unnecessary gyration? We have had a lot of biases
that have never materialized,'' he added.
Critics said there could be significant confusion over what the Fed deems important enough to announce.
They said the ''infrequent'' disclosure creates two classes of bias -- one that is not worth immediately reporting and a ''super'' bias that the Fed would regard as
sufficiently important to warrant immediate communication to the market.
History shows the bias has a poor record of signaling actual rate changes. But a selectively disclosed bias may well have a higher correlation with rate moves in the
future.
Some market players predicted the market would react to the first bias change announcement as it would to an outright policy move, concluding that a rate
adjustment is inevitable. |
