Bullard: Fed should hold press conference at every meeting
BOSTON Aug 2 (Reuters) - A senior Federal Reserve official said on Friday that the U.S. central bank's current practise of holding quarterly press conferences could be distorting policy decisions, and urged the Fed to stage one after every meeting to ensure a smooth process.
St. Louis Federal Reserve President James Bullard told Reuters in an interview that at the moment, the four annual policy-setting committee meetings followed by press conferences were taking on an outsized importance.
"September versus December, as if there was no meeting in October," he said, referring to two upcoming meetings that will be followed by press conferences with Fed Chairman Ben Bernanke.
Financial markets are closely focused on the September and December meetings as the most likely moments for the Fed to announce it would scale back bond purchases from a current $85 billion monthly pace. As a result, markets are generally discounting any decisions on tapering at the October meeting.
"I want the committee to have a press conference at every meeting, so that every meeting looks, ex ante, identical. And this would give the committee the freedom to make a move or not make a move at a particular meeting," said Bullard, a voting member of the committee this year.
Economists, and some Fed officials in private, say the press conferences provide an opportunity to further communicate the nuance of the central bank's thinking to financial markets.
But Bullard, who described himself as on a "campaign" to adopt the European Central Bank's practise of holding them after every meeting, said this was having unintended consequences.
For one thing, it might be encouraging policymakers to delay - or bring forward - decisions in order to make them at a meeting with a press conference.
"It is putting too much pressure on these meetings and it is making, in my opinion, the committee sometimes make decisions that are a little bit out of sync with the most recent data," he said, citing recent experience.
"I think that is a little bit of what happened in June, when we were announcing what arguably was a bit more hawkish policy in an environment where we were downgrading our forecast for 2013 and downgrading our inflation outlook in 2013."
Bernanke surprised markets at the June 19 post-meeting press conference with a detailed plan to begin tapering asset purchases later this year, provided the economy recovers as expected and inflation begins to rise from current low levels.
Subsequent violent global market volatility was blamed on a confusing Fed communication strategy because, at the same time as talking about tapering, Fed officials had also released updated quarterly economic forecasts which were a little bit more downbeat for the current year.
Asked how much support for holding more press conference he has among the other members of the 19-strong committee, Bullard declined to speak for his colleagues, but made a firm prediction that it was going to happen.
"I think it is the right thing to do and I think it is the future of the FOMC," he said, referring to the Federal Open Market Committee, which is the policy-setting committee's official name. "I think that eventually, one way or the other, we'll have to go to a press conference at every meeting."
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