Fed to begin providing forecasts of key interest rate movements

Washington: The Federal Reserve, taking an innovative step in its public statements, will start providing a quarterly forecast of when it plans to make a shift in the key short-term interest rate that it sets — its latest effort to spur the sluggish economy and calm volatile stock markets.

The projections, to start late this month, may act as a stimulus by offering a tentative financial road map to consumers and businesses to encourage them to borrow and take risks.

It also could help ease market tension and push down already historically low yields on long-term bonds. The greater transparency should "encourage more risk taking if speculators know where the cost of funds would be for a longer time," said Jack Ablin, chief investment officer of Harris Private Bank in Chicago.

The central bank's new communications strategy, revealed in meeting minutes released on Tuesday, also marks the latest in Fed Chairman Ben S. Bernanke's unusual efforts to make the typically secretive institution more transparent.

It wasn't long ago that the Fed shared almost no information about its thinking or decision-making process, preferring instead to influence markets and the economy by maintaining the element of surprise with its sudden announcements.

But under Bernanke, the Fed has steadily moved towards giving the public more information, believing, as other central bankers around the world do, that better communication of its plans and goals would reduce volatility in the markets and help to achieve the ends sought by the Fed.

Bernanke and others on the Fed's policy committee had made clear in recent months that they were contemplating changes in their communications strategy, which some critics said provided too much information to the public. Under the new practice, the Fed, at the end of its January 24-25 meeting, will publish projections for what it sees as the target short-term rate in the fourth quarter of this year and the "next few calendar years," according to the minutes of the Fed's early December meeting.