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The Globe and Mail

Fed weighs more disclosure on interest rate policy

Fed vice-chairman Janet Yellen

© Price Chambers / Reuters/REUTERS

The U.S. Federal Reserve held a wide-ranging debate on communications strategy at its most recent meeting, suggesting a shift in the way it frames policy may be its next step to buttress a weak recovery.

Most Fed officials supported providing the public with more detail about the likely path of monetary policy and interest rates but rejected the idea of tying their actions to targets for growth or the level of prices, according to meeting minutes released by the central bank Tuesday.

A few Fed officials believed the outlook for modest growth might warrant further policy accommodation, even though the Fed ultimately took no new steps, minutes of the Nov. 1-2 meeting indicated.

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At the meeting, the Fed sharply cut its forecast for economic growth, raised projections for unemployment and said it was considering the possibility of buying more mortgage debt to supercharge a modest recovery.

One official, Chicago Fed President Charles Evans, urged more aggressive action to stimulate the economy immediately and dissented against the decision, which was approved by a vote of 9-1.

Fed Chairman Ben Bernanke after the meeting described the pace of growth as "frustratingly slow," adding that Europe's debt crisis posed big economic risks.

The minutes show officials spending considerable time on refining the way they communicate their policies to the public.

Policy makers have been looking for ways to reassure financial markets the Fed will maintain its ultra-easy money policy until the recovery is firmly entrenched. Pushing out expectations for when monetary policy will tighten can keep borrowing costs low, since they incorporate rate expectations.

"A majority of participants agreed that it could be beneficial to formulate and publish a statement that would elucidate the committee's policy approach," the Fed said.

Fed officials discussed setting explicit targets for inflation but worried that doing so might wrongly suggest the central bank was giving short shrift to the full employment side of its dual mandate. The U.S. central bank is charged by Congress with keeping inflation in check, but needs to balance that with another mandated goal of trying to ensure as many Americans as possible are working.

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Mr. Bernanke asked a group of officials studying communications improvements to assess whether the Fed should issue a statement on the Fed's longer run goals and policy strategy. The chairman also asked the panel, headed by vice-chair Janet Yellen, to study whether the Fed should publish the views of individual officials regarding the appropriate path of interest rates.

With a file from The Associated Press

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