Transcripts

The Fed Vows To Report It's Economic Numbers More Often

SUSIE GHARIB: The Federal Reserve is getting more talkative. Chairman Ben Bernanke said today the Fed will issue an updated economic forecast when it releases the minutes of its October meeting next Tuesday. As Darren Gersh explains, the move is part of a long-studied change in the way the nation's central bank explains itself.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Today, Ben Bernanke took much of the guesswork out of understanding just what the world's most powerful financial institution is up to. The Federal Reserve chairman said he and his colleagues have decided to communicate their economic outlook more often and in more detail.

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: The changes will provide a more timely insight into the committee's outlook, will help households and businesses better understand and anticipate how our policy decisions respond to incoming information and will enhance our accountability for the decisions we take.

GERSH: Under the new Federal Reserve communications strategy, policy makers will release quarterly economic forecasts, up from the two they now give to Congress. The estimates will come from all the members of the interest rate setting Federal Open Market Committee and each member will be asked to predict real GDP, employment and inflation. The Fed will also extend its forecast out to three years. But even more important than giving a number for where prices may be headed, the Federal Reserve will provide a narrative that explains the thinking behind its forecasts. Vincent Reinhart is a former senior Fed staffer.

VINCENT REINHART, ECONOMIST, AMERICAN ENTERPRISE INSTITUTE: And that's an opportunity to provide nuance about the outlook. It's an opportunity to provide information about how they are thinking about policy setting and also what risks there are to the outlook.

GERSH: In the past, Chairman Bernanke has argued the Fed should set a specific inflation target. The new policy does not call for that, but with a three-year forecast, Bank of America chief economist Mickey Levy says analysts will have a much easier time figuring out where interest rate policy is headed.

MICKEY LEVY, CHIEF ECONOMIST, BANK OF AMERICA: This makes their objectives and the path of achieving their long-run inflation objective much clearer.

GERSH: In addition to forecasting so-called core inflation which excludes volatile fuel and food prices, Bernanke and his colleagues plan to issue forecasts for overall inflation. That should help regular investors and businesses set their expectations for future inflation. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.