Daily Archives: April 26, 2012

Robin Harding

The most obvious problem with the Fed’s interest rate forecasts, discussed here yesterday, is their dissonance with the FOMC statement’s forecast of exceptionally low interest rates “at least through late 2014″.

The median participant (9th of 17) thinks rates should be 1 per cent at the end of 2014 and the median voter (5th or 6th of 10) must think they should be a minimum of 0.5 per cent. The statement is a committee decision and it can reasonably be different from the median individual view. It is still confusing, though, and weakens the credibility of the statement when they look so different.

The Fed is looking at a wide range of options to tweak communications further. Some would resolve the issues with this chart – for example Mr Bernanke acknowledged the idea of identifying who made each individual forecast – while others address the broader and more important question of giving information on the Fed’s reaction function.

Here, though, are a few ways to address the simple confusion caused by the voter/non-voter divide in the rate forecast chart.  Read more

Robin Harding

There’s probably nothing that would annoy Ben Bernanke more than being caught in a logical inconsistency over some aspect of monetary policy. At the Fed’s press conference today, he vigorously defended himself against Paul Krugman’s charge that the Fed’s recent actions are inconsistent with his academic views on Japan fifteen years ago.

The Fed’s interest rate forecasts, however, are getting the bank into a real bind: Read more