January 3, 2012- The Federal Reserve announced it would provide forecasts for shifts in key interest rates. Each quarter the central bank will reveal when there are plans to change the key short-term benchmark rates. This new strategy by the Fed is an attempt to help stimulate the economy and lessen the volatility in the stock market.
The projections, that start this month, should help offer a tentative road map for finances for businesses and consumers to stimulate them to borrow more and take more risks. This transparency should increase risk taking since the cost of funds for the long term would be available.
The new strategy was released in the minutes of the central bank’s meeting on Tuesday. It is another example of Chairman Ben Bernanke’s attempt to make the very secretive banking institution a bit more transparent.
Until just recently, the Fed would not share any information of its upcoming decision-making. It preferred to influence the economy and markets by using the element of surprise. However, since the arrival of Bernanke, the Fed has started to give more information to the public as other central banks across the globe do.
The Fed will announce at its meeting in late January its projections for the short-term rate for this year’s fourth quarter as well as for the next couple of calendar years. The forecast will be updated four times each year by the Fed.