CHRONOLOGY-Federal Reserve’s transparency steps

Oct 19 (BestGrowthStock) – Policymakers at the U.S. Federal Reserve
last month debated providing more detail on the rates of
inflation they would like to see and discussed the possibility
of adopting a price-level target.

The return of inflation targeting to the Fed’s agenda at
the Sept. 21 policy meeting comes as the U.S. central bank
grapples with how to lift inflation, which many policymakers
view as too low for comfort, and bring down a stubbornly high
9.6 percent unemployment rate.

The Fed is widely expected to embark on a new round of
purchases of U.S. government bonds as soon as next month in a
bid to provide more support to the economy, and it is mulling
other tools, including communications strategies, to boost the
effectiveness of its actions.

Officials also considered the possibility of targeting a
path for GDP growth, minutes of the Sept. 21 meeting said.

The last time the Fed took a sizable step toward targeting
an explicit rate of inflation was when it added longer-term
projections to its quarterly economic forecasts in early
2009.

Below are some of the most significant strides toward
greater openness the Fed has taken since 1994.

February 1994 — The policy-setting Federal Open Market
Committee begins to release statements announcing interest-rate
moves. However, it would remain silent after meetings in which
rates were held steady.

February 1995 — FOMC decides to issue “lightly edited”
verbatim transcripts of deliberations with a five-year lag. It
also decides to make permanent the policy established a year
earlier of announcing interest-rate moves.

August 1997 — Fed publicly acknowledges policy is
formulated in terms of a target for the federal funds rate.
FOMC begins to put a number on the intended fed funds rate in
its policy-implementing directive to the New York Fed.

December 1998 — FOMC adopts policy of immediately
announcing shifts in bias when it wants to communicate a major
change in its views of the balance of risks or likely direction
of policy.

December 1999 — FOMC adopts new procedure on issuing
assessments of balance of economic risks, instead of policy
bias. The Fed announced the decision in January 2000. The
statement issued after the February 2000 FOMC meeting was the
first with the new balance of risks language.

March 2002 — FOMC adopted policy to announce roll call on
votes, including whether there were any dissenting voices.
Previously the roll call vote was disclosed only when the
minutes of the meeting were released.

July 2004 — The Fed begins to provide a forecast for core
inflation, as opposed to overall inflation, in its semiannual
monetary policy reports to Congress. Fed officials view core
inflation as a better gauge of underlying trends.

December 2004 — FOMC decides to accelerate the release of
minutes of its meetings by making them public three weeks after
each gathering as opposed to after the subsequent meeting, a
lag of about six weeks.

February 2005 — For the first time, the Fed provides
two-year forecasts in its February monetary policy report to
Congress. Previously, the February report contained only
forecasts for the current year, with the July report offering
forecasts for both the current and coming years. Some analysts
viewed the shift as a step toward inflation targeting.

October 2006 — FOMC discusses the advantages and
disadvantages of using a numerical inflation objective. But it
says the topic requires further discussion.

March 2007 — FOMC discusses possible advantages and
disadvantages of specifying a numerical price objective for
monetary policy, according to minutes of its meeting.

November 2007 — The Fed says it will increase frequency of
its economic forecasts to four times a year from two, and
extend the horizon of projections to three years from two.

December 2008 — FOMC cuts interest rates to a range of
zero to 0.25 percent and discusses “added clarity” that could
be created by an inflation target.

January 2009 — FOMC meets by conference call to discuss
issues associated with establishing an explicit numerical
objective for inflation, but comes to no decision. Officials
split between those who say a transparent inflation target
would improve policy effectiveness and those who feel extending
horizon of regular economic projections could serve the same
purpose.

February 2009 — FOMC adds longer-run projections for GDP,
unemployment, and PCE inflation to its three-year forecasts.
Most FOMC participant says they want to keep inflation in a 1.7
percent to 2 percent range. The move was seen as effectively
establishing an inflation target.

September 2010 — FOMC debates possible adoption of a
price-level target as a tool to affect short-term rate
expectations at their Sept. 21 meeting. Officials also
discussed targeting a path for the level of nominal GDP, and
for providing more information about desirable rates of
inflation.

CHRONOLOGY-Federal Reserve’s transparency steps