WASHINGTON: The Federal Reserve System's decision to publish members' predictions about short-term interest rates has drawn praise from PR agency executives. However, other experts contend the move towards transparency doesn't go far enough.
The Federal Reserve will publish its first forecasts using the new system on Wednesday, following a two-day meeting of the Federal Open Market Committee, which sets policy for the central bank. The committee is also reportedly considering the publication of agency goals for the pace of inflation and the level of unemployment.
“The Federal Reserve is uniquely the most essential agency in Washington, and it has been operating in crisis mode for the past 20 years, said Neil Dhillon, SVP and managing director of MSLGroup's Washington office and its North American director of public affairs. “The announcement to shift its communications structure to a proactive stance is not only smart but could have a positive impact on its policies moving forward.”
The major reason for this shift is to more clearly guide investor expectations that ultimately dictate the market's mood, housing market conditions, and unemployment, he added.
The change in strategy will also help the Federal Reserve explain the role it plays in the US economy, said Brendan Daly, EVP and national director of public affairs at Ogilvy Washington. It's also a smart move by an agency whose reputation took a beating after the financial crisis of 2008, he said.
“Generally, the public doesn't understand what the Federal Reserve is,” Daly said. “This new communications policy shows it is trying to be more open in explaining what it does.”
Others speculated that the Federal Reserve could have shallower intentions.
“It could be a PR stunt; it depends on how descriptive they are with the forecasts,” said Robert Auerbach, professor of public affairs at University of Texas at Austin and a former economist for the US House of Representatives Financial Services Committee. The move would be more useful to investors and the public if the Federal Reserve didn't have a five-year lag on releasing transcripts from its meetings, he added.
Nancy Watzman, a consultant at advocacy organization the Sunlight Foundation, said she feels “there are still plenty of areas where the Fed remains opaque,” noting that the agency doesn't report which European banks benefit from its currency swaps with foreign central banks.
A Federal Reserve representative declined to comment on the change in policy.