The US Federal Reserve will make four economic forecasts each year, up from the current two, which will include more information on overall inflation projections, chairman Ben Bernanke said Wednesday.
The goal is for Fed officials to "provide the public with greater and more timely insight into the Federal Open Market Committee's (FOMC) views of the economic outlook and the risks to that outlook," Bernanke said in a speech to the Cato Institute. The time horizon for the expanded Fed forecasts will extend to three years from the current two. The Fed will also publish summaries and explanations of the Federal Open Market Committee meeting participants' forecasts with the minutes of the meeting at which they were discussed. The first release of the expanded forecasts will be November 20 with the minutes of the October 31 FOMC meeting. Projections will continue to be released in February and July of each year as they are now, along with the new forecasts in the second and fourth quarters -- April and October 2008. The Fed has decided on the new policy because "a considerable amount of evidence indicates that central bank transparency increases the effectiveness of monetary policy" said Bernanke. The Fed reports will now include projections on "headline" or overall inflation, including food and energy costs, and not just "core" prices which some economists see as a better indicator of future trends. "Ultimately, households and businesses care about the overall, or 'headline,' rate of inflation," Bernanke said. "Therefore, the FOMC should refer to an overall inflation rate when evaluating whether the Committee has met its mandated objectives over the long run."
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