Fed press briefings could create volatility on slips

* Fed press briefings could add volatility on word slips

* ECB media briefings have affected euro, bund futures

* Fed will begin press briefings on April 27

By Karen Brettell

NEW YORK, March 24 (Reuters) – The Federal Reserve’s plan
to hold media briefings could increase the chance that Fed
Chairman Ben Bernanke slips up with less tightly controlled
language, potentially adding more room for interpretation and
more market volatility.

Most investors, however, view the move as likely to help
the U.S. central bank convey its message, better allowing
traders to analyze Fed policy for signs over when it will end
monetary stimulus, and increase benchmark interest rates.

“Right when it happens there might be more volatility, but
assuming that the message is clear and the Fed’s opinion
doesn’t change intra-meeting, there probably should be less,”
said Eric Stein, fund manager at Eaton Vance in Boston.

Fed interest-rate statements are closely monitored and
compared to previous releases for any changes in language and

As the Fed speaks off script in question-and-answer
briefings, Bernanke may be more likely to accidentally deviate
from the closely controlled language in his statement.

“The ECB does this, and has Q&A, and on occasion, there
have been slip-ups. There have been comments that have been
clarified,” said Richard Gilhooly, interest-rate strategist at
TD Securities in New York.

At the first of the briefings on April 27, Bernanke will
hold a rare question-and-answer period with reporters
following the regularly scheduled two-day meeting on monetary

Four briefings will then be held per year following the
regular policy meetings and coinciding with Fed meetings at
which officials give their quarterly economic forecasts.

European Central Bank President Jean-Claude Trichet holds
press briefings after policy meetings, and his remarks often
do affect the euro.

Euro-zone interest-rate and German Bund futures fell
earlier this month, and the euro soared to a four-month high
against the dollar that day, after ECB President Jean-Claude
Trichet told a news conference that “strong vigilance” was
required on inflation.

The ECB used the phrase “strong vigilance” repeatedly
during its 2005-2007 rate-hike cycle, typically one month
before it raised rates, although there were exceptions to that
rule. Some analysts took the remarks earlier this month as a
signal the central bank may be gearing up for a return to
monetary tightening.

Whether Bernanke induces as much volatility as Trichet
often does remains to be seen, though.

“They’re taking a middle-of-the-road approach with just
four briefings a year, and we’ll have to see if he provides a
great deal of information about internal debates or simply
elaborates on the statement,” said Brian Dolan, chief
strategist at Forex.com in Bedminster, New Jersey.

“But if you go back far enough, the Fed didn’t even
announce rate decisions. The market had to figure it out for
itself. So we’ve come a long way.”
(Additional reporting by Chris Reese and Steven C. Johnson in
New York, and Ann Saphir in Chicago; Editing by Jan Paschal)

Fed press briefings could create volatility on slips