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Fed to regularly forecast interest-rate changes
WASHINGTON — In a major shift, the Federal Reserve will start announcing four times a year how long it plans to keep short-term interest rates at current levels, according to minutes from its December policy meeting.
The change is intended to reassure consumers and investors that they will be able to borrow cheaply well into the future. And some economists said it could lead to further Fed action to try to invigorate the economy.
The shift marks the Fed’s latest effort to make its communications with the public more open and explicit.
The Fed’s first forecast for interest rates will be included in the economic projections it will issue after its Jan. 24-25 policy meeting.
More guidance on rates might help lower long-term yields further — in effect providing a kind of stimulus. Lower rates could lead consumers and businesses to borrow and spend more. The economy would likely benefit.
Lower yields on bonds also tend to cause some investors to shift money into stocks, which can boost wealth and spur more spending.
The Fed has left its key short-term rate at a record low near zero for the past three years. In August, it said it plans to leave the rate there until at least mid-2013, unless the economy improves.
After its Dec. 13 meeting, the Fed issued a policy statement that portrayed the U.S. economy as improving slightly. It declined to take any further steps to boost growth.
In January, the Fed will release an interest rate forecast for the October-December quarter of 2012 and for the next few calendar years, the minutes show. It will update that forecast each quarter.
“Most people had expected the funds rate would start rising in the second half of 2013,” Zandi said. “But Fed officials seem to be more concerned about the economy’s prospects than investors currently think.”
But Paul Dales, an economist with Capital Economics, cautioned that the minutes contained few signs that a third round of bond purchases is imminent. He thinks that such a step would come only if the economy weakened.
The Fed sketched a slightly healthier view of the economy after its last policy meeting for 2011. Hiring has picked up. And consumers are spending more despite slower growth globally.
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