WASHINGTON (MNI) – The following are excerpts from Federal Reserve
Chairman Ben Bernanke’s press conference following the Federal Open
Market Committee meeting Wednesday:
QUESTION FROM MARKET NEWS INTERNATIONAL:
What was the rationale for continuing to have forward guidance
phraseology instead of just letting these forecasts, these new forecasts
of the funds rates speak for themselves?
BERNANKE:
That’s a very good question.
I might have commented (…) that our two main tools at this point,
given the short-term interest rates are close to zero, are asset
purchases but the other is communications; and to the extent that we can
communicate that rates will be lower for longer that will ease financial
conditions and be a way that we can affect the state of the economy. And
that’s part of the reason, other than just general desire for
transparency, that we brought out some of these ideas at this point.
The reason that we just don’t release the economic projections and
leave it at that, is because while the economic projections of future
policy rates are an important input to our policy discussions around the
table, the decision ultimately is made by the Federal Open Market
Committee, you know, which is the voters sitting around the table, and
in the process by which we exchange ideas and make arguments and come to
a collective determination.
So, you know, we don’t set the federal funds interest rate by
having members send in their vote and not having a meeting. We have a
meeting for a reason, which is to talk to each other and try to come to
some kind of consensus. So the FOMC will always in some sense trump the
projections of forward interest rates, but clearly because the
participants and people around the table are the same, the projections
should give significant information about where the FOMC is likely to
go.
** Market News International Washington Bureau: 202-371-2121 **
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