Fed rejects idea of consensus forecasts, "maybe forever": Fisher

GAINESVILLE, Texas Wed Dec 19, 2012 11:14am EST

Richard W. Fisher, President and Chief Executive Officer for the Federal Reserve Bank of Dallas, speaks on International Economics at the Council on Foreign Relations in New York, March 3, 2010. REUTERS/Shannon Stapleton

Richard W. Fisher, President and Chief Executive Officer for the Federal Reserve Bank of Dallas, speaks on International Economics at the Council on Foreign Relations in New York, March 3, 2010.

Credit: Reuters/Shannon Stapleton

GAINESVILLE, Texas (Reuters) - The U.S. Federal Reserve, which last week for the first time adopted specific economic guideposts to help shape expectations for how long rates will stay low, has for now dropped the idea of coming up with a collective forecast for the economy.

Fed policymakers will instead continue to make their individual best guesses on what's ahead for inflation, unemployment, and GDP growth, which the Fed publishes quarterly in a so-called summary of economic projections, or SEP.

"It's an exercise that we have played with as a committee," Dallas Federal Reserve Bank President Richard Fisher told reporters after a speech here, when asked about the Fed's efforts to develop a consensus forecast. "And we have for the time being -- and maybe forever, maybe -- decided to keep with this SEP exercise that we have."

The Fed spent time at least two meetings looking at the mechanics of developing a joint view on the economic outlook.

But Fed officials seem to have concluded that coming to a consensus on overall policy is hard enough, let alone getting all 19 policymakers to agree to every nut and bolt on the thinking that goes into it. Each forecast in the SEP has its own underlying assumptions on the appropriate path of policy.

The Fed last Wednesday said it would keep interest rates near zero until unemployment - now at 7.7 percent - falls at least to 6.5 percent, as long as inflation does not rise above 2.5 percent. The vote was 11 to 1, with only Richmond Fed President Jeffrey Lacker dissenting; several non-voters, including Fisher, also objected.

At least one top Fed official, Minneapolis Fed President Narayana Kocherlakota, has said that having a collective Fed view on inflation and other important economic metrics would be an essential part of adopting thresholds.

If there is no known collective view on the economy from Fed policymakers, he worried before last week's meeting, investors will be unable to judge whether the Fed believes its thresholds have been breached, and therefore will find it difficult to anticipate when rates will rise.

Fisher, however, suggested that the market can rely on Fed Chairman Ben Bernanke to show the way, even without consensus forecasts. Bernanke gives quarterly press conferences that give him the chance to explain and expand on policy decisions.

"Ben's press conferences are the most important, in my view," Fisher told Reuters.

(Reporting by Ann Saphir; Editing by Nick Zieminski)

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