Fed to expand U.S. forecasts in transparency step

By Mark Felsenthal

WASHINGTON (Reuters) - The once-secretive Federal Reserve on Wednesday announced steps to offer more insight on its views of the economy and the likely path of interest rates in a bid to make U.S. monetary policy more effective.

The Fed said it will release the economic projections of its policy-makers four times a year instead of two, and the forecasts will cover three years, up from two previously.

In a speech detailing the changes, Fed Chairman Ben Bernanke said central bank transparency increases the effectiveness of monetary policy and enhances economic and financial performance by reducing uncertainty and allowing financial markets to anticipate policy changes.

"Providing more information about these forecasts, including discussions of the factors underlying the forecasts and of (Fed) participants' assessments of the risks to the committee's objectives, should improve the public's understanding of the rationale for the current stance of monetary policy and any changes to that stance," he said.

ACCEPTABLE RATE OF INFLATION

Analysts said the longer-term forecast horizon would offer a better sense of the rate of inflation officials were aiming for, but the changes would not remove uncertainty on how the central bank would try to meet its objectives.

The changes "will give more insight into what the (Fed) feels is the long-run potential growth rate of the economy and what an acceptable range is for the rate of inflation," said Michael Moran, chief economist at Daiwa Securities America in New York.

"But I don't think it will make it any easier to form judgments about what the (Fed's interest-rate setting) Federal Open Market Committee will do meeting to meeting."