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Here's what the Fed's 'new transparency' looks like


They're not exactly PowerPoints, but the Federal Reserve Wednesday adopted a new "fuller disclosure" policy that comes with visual aids.

The first chart represents the number of members of the central bank’s rate-setting Federal Open Market Committee who expect to see, in a given calendar year, short-term interest rates begin moving higher from the current range of 0 to 0.25 percent. The most likely year, according to the panel, is 2014. But like most Fed decisions, the committee is not unanimous.

The lower chart shows where each panel member thinks the benchmark, short-term federal funds rate should be at the end of each of the next several years, and in the longer run. Each dot represents one person’s projection.  (Responses are rounded to the nearest quarter point.)

The Fed has also begun publishing more detailed and explicit information on its projections for economic growth, inflation and unemployment. 

In the charts above show that central bankers generally expect growth to rise from the current 2 percent rate to about 4 percent by the end of 2014, while the unemployment rate drops from the current 8.5 percent to about 7 percent.

The Fed has been debating for some time the idea of publishing its internal inflation and unemployment forecasts. The central bankers have been following an unofficial inflation target of about 2 percent of the last few years. It has now become more explicit about that target, a victory for Fed Chairman Ben Bernanke who has been pushing for it.

Part of the problem with publishing both inflation and unemployment targets is that, while they are both part of the Fed’s “dual mandate,” managing the two objectives often call for conflicting policies. Controlling inflation often calls for tighter monetary policy, for example, which typically slows growth and raises the level of unemployment.

Click here for the full Fed projections (pdf)


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