The minutes from the December 13th FOMC meeting revealed that the Fed will make a significant change in the way its communication strategy. Beginning with the January 24-25 FOMC meeting, the Fed will begin issuing quarterly forecasts regarding the rate path of the federal funds rate.
It is hoped that the forecast will help investors to determine how long the Fed will keep short-term rates at the current low levels. CNBC reports that the new communications strategy could help assure investors, companies and consumers that rates won't rise before a specific time. Analysts suggest that this could actually help lower long-term yields further.
To this point, the Fed has kept the target rate for the Fed Funds rate at 0% to 0.25% for the past three years. In addition, the Fed announced last year that rates would stay at the current low levels until mid-2013 unless the economy perks up.
The Fed’s new rate summary will also describe the key factors underlying the economic assessments as well as key information regarding participants' expectations for the Federal Reserve's balance sheet.
Analysts believe that projections relating to the size of the Fed’s balance sheet will be helpful in determining when the Fed may be looking to add to or take back quantitative easing measures.
The minutes also showed that the Fed felt the economy was improving slightly. But despite the better outlook, some members of the FOMC were leaning toward providing additional stimulus for the economy. However, Mr. Bernanke’s Fed ultimately decided that it was not appropriate to take additional measures at the present time.
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