Frederick Mishkin Discusses the New Federal Reserve Strategy

In accordance to the Congressional mandate to make the Federal Reserve more transparent in sharing information with the public the Fed announced several changes that were made on November 14th.
The main changes to the Federal Reserve are:

• The Federal Open Market Committee participants now provide projections for four key macroeconomic variables. These four projections are the growth of real gross domestic product (the GDP), the unemployment rate, overall consumer inflation by the price consumption expenditures (the PCE), and the core consumer inflation.
• The forecast horizon for projections has been extended from two years to three.
• The Federal Open Market Committee now augments the quantitative forecasts with a narrative that describes participants’ views of the principal forces shaping the outlook and the sources of risk to that outlook.
• The”Summary of Economic Projections” now provides information about a range of views among Federal Open Market Committee participants and the path seen as the most likely for economic activity and inflation is consistent with the Federal Reserve’s dual mandate
• Lastly The “Summary of Economic Projections” will be published four times a year instead of the previous two times a year.

These changes are designed to better inhance the flow of information so the Federal Reserve will have more information to better make decisions to recover from this credit crisis.

To read the full speech from Frederick Mishkin about the Federal Reserve’s enhanced communication strategy head on over to the Federal Reserve’s website.