Fed should better safeguard economic data, internal watchdog says

The Federal Reserve headquarters in Washington September 16 2015. REUTERS/Kevin Lamarque

(Reuters) - The Federal Reserve should beef up its controls over embargoed economic information given to news outlets, the U.S central bank’s internal watchdog said on Wednesday in a 38-page report dated April 15 and released publicly on Wednesday.

The audit of the central bank’s procedures by the board’s Office of Inspector General covered a period both before and after the Fed relocated the site it uses for releasing sensitive material, and the auditor noted “substantial improvements were planned before we began our review and that many were implemented during our review.”

The Fed provides on embargo its most market-sensitive information - ranging from the Federal Open Market Committee’s statement on monetary policy and policy meeting minutes to monthly data on industrial production and consumer credit - to vetted members of the press, including Reuters journalists, in a secured room on Fed premises.

Reporters must surrender cell phones and other electronics and pass through a metal detector before entry to the room, where they can write news stories for publication when the embargo is lifted and the Fed restores communications to the outside world.

Still, the audit found further ways to safeguard the Fed’s information, such as improving the verification process for reporters, making more clear when documents provided under embargo can be released to the public and making rules on embargoed content more consistent, regardless of how it is provided by the Fed.

The audit also called on the Fed to analyze the sensitivity of some embargoed material released through a secure website to evaluate whether the benefits of providing information in this way outweighed the risk of unauthorized disclosure.

The Fed board, in a letter to the auditor, said it was “in general agreement” with its recommendations, noting that many were implemented in the course of the review. “Others are now in the process of being implemented,” the board said.

The Fed has come under fire in recent months for lapses in its ability to keep its own secrets, with the Justice Department looking into an apparent leak of details from a Fed policy meeting in 2012. Wednesday’s report did not touch on that leak, which has also drawn fierce lawmaker criticism, but focused instead on the U.S. central bank’s handling of embargoed economic material.

Reporting by Ann Saphir; Editing by Andrea Ricci