With the Federal Reserve expected to begin raising short-term interest rates next year, outside observers say the central bank should soon begin holding news conferences after every regularly scheduled policy meeting. If the more frequent briefings don't start this year, then they most certainly should early in 2015, the observers say.
It was only three years ago that the Federal Reserve announced that then-Chairman Bernanke would hold news conferences four times a year. In the official announcement at that time, the central bank said it would "continue to review its communications practices in the interest of ensuring accountability and increasing public understanding." The communications task force was led by then-Vice Chair Janet Yellen, the woman who succeeded Bernanke earlier this year and is now the one taking questions at the sessions with reporters.
Federal Reserve Chair Janet Yellen, delivering an opening statement during her news conference on June 18, 2014.
Rate hike looming
The drive for clarity from the Fed was dealt something of a setback recently as it embraced more "qualitative" assessments of the economy over previous numerically-based thresholds for possible rate hikes. "While the Fed should hold press conferences after every meeting even if there is no major news, it becomes critical that they do so as they approach the point where rates will be increased," says economist Joel Naroff, of Naroff Economic Advisors.
He's particularly concerned that the Fed may have to raise rates next year during a meeting of the Federal Open Market Committee that will be followed by only a written statement.
A subtle shift?
There's been no immediate sign that the Yellen Fed is ready to step up the schedule of news conferences soon, although she recently indicated a willingness to ramp up communication more generally.
"I'm personally committed to communicating with the public whenever communication is appropriate… I would feel it appropriate for me to either have additional communications meetings with the press or to give speeches," Yellen told reporters at her news conference last week.
Ryan Sweet, director of economic research for Moody's Analytics, says the pressure will build on the Fed next year to hold more news conferences in order to communicate its intentions. The current schedule is fine for the remainder of this year, because monetary policy is on "autopilot," he says.
"In 2015, and particularly in 2016, I think the more press conferences the better, because we're going to want the Fed to be very transparent," says Sweet, adding that the Fed "is really going to want many opportunities to convey to the general public their latest thinking on where interest rates are headed."
Projections provided this month by individual members of the FOMC indicate that benchmark interest rates will be rising through the next couple of years.
Other steps needed
Beyond news conferences, there's more the Fed should be doing to follow through on its pledges for transparency and communication, says Kathy Kiely, managing editor for the Sunlight Foundation, a nonprofit which advocates for "open government."
"We definitely think that the Fed could do a lot more to improve transparency and I think the press conferences are clearly a step in that direction," Kiely says. For example, she would like the Fed to release data in machine-readable form that would enable easier access by the general public.
More specifically, Kiely's organization complains that transcripts of FOMC meetings are released only a full five years after they are held. The Sunlight Foundation points to a 2011 report from the Government Accountability Office which looked at potential conflicts from the Fed's emergency lending program during the financial crisis. The GAO urged "more complete documentation of the directors’ roles and responsibilities with regard to the supervision and regulation functions, as well as increased public disclosure on governance practices to enhance accountability and transparency."
Yellen on transparency
In a speech before business journalists last year, Yellen indicated that transparency is necessary in order for the Fed to achieve its own objectives. "The Federal Reserve’s ability to influence economic conditions today depends critically on its ability to shape expectations of the future, specifically by helping the public understand how it intends to conduct policy over time," she told the group.
Sunlight's Kiely says Fed officials need to make good on pledges of open communication. "I would quote the old saying, 'If you are going to talk the talk, you better be prepared to walk the walk,'" she says.
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