Post by jannikki on Dec 7, 2005 20:05:31 GMT -4
Greenspan: Fed Tries to Balance All Needs
Wednesday December 7, 1:53 pm ET
By Jeannine Aversa, AP Economics Writer
Federal Reserve Tries to Balance Need for Private Debate, Public Openness, Greenspan Says
WASHINGTON (AP) -- The Federal Reserve works hard to balance policy-makers' need to have private, unvarnished discussions about economic matters and investors' desire to keep abreast of the Fed's inner workings, chairman Alan Greenspan says.
"The Federal Reserve's current practices strike a reasonable balance between transparency and the degree of confidentiality appropriate" for policy-making, the Fed chief said in written responses to a series of questions posed by Rep. Jim Saxton, R-N.J., chairman of Congress' Joint Economic Committee.
The written responses, released Wednesday, were requested during a Nov. 3 committee hearing.
Greenspan, who retires on Jan. 31, has been credited with improving the Fed's openness and communications with Wall Street and Main Street in his 18-plus years at the helm. White House economist Ben Bernanke, chosen to succeed Greenspan, has said he plans to build on those efforts.
Clearer signals from the Fed about economic conditions and interest rates can help shape public perception and assist the Fed in attaining its goals -- namely keeping the economy and inflation on an even keel, Greenspan suggested.
Yet "excessive transparency could inhibit policy-makers, making them less spontaneous in their remarks and less willing to explore new ideas," Greenspan said. "Such an outcome would have adverse effects on policy decisions."
Greenspan and Bernanke have previously said that the notion of televising the Fed's closed-door meetings, where interest rate policy is set, would not be a good idea and would probably inhibit discussion. Greenspan didn't mention that possibility in his response Wednesday.
After years of operating in a mostly Sphinx-like mode, the Fed in 1994 began to state when it was changing the federal funds rate, a key rate used to influence economic activity. Eventually the Fed began to release statements after each of its eight regularly scheduled meetings a year and did so even when rates held steady.
Over time, the Fed began to give a reason for its actions and a brief assessment of economic conditions. Since early 2002, these statements also include how members voted.
In another written response, Greenspan said "it is impossible to know with any certainty" when interest rates have reached "neutral," the point where they are neither slowing nor stimulating overall economic activity.
The Fed has boosted interest rates 12 times since June 2004 to bring rates from extraordinarily low levels back to a more normal level now that the economy is on solid ground.
Before the Fed began to boost rates, they stood at a 46-year low of 1 percent. Currently they are at 4 percent, the highest in more than four years. Another rate increase is expected at the Fed's next meeting, Dec. 13.
"A full consideration of current and prospective economic developments, and of the risks to the outlook, is essential for the conduct of monetary policy," Greenspan wrote.
biz.yahoo.com/ap/051207/greenspan.html?.v=2
Wednesday December 7, 1:53 pm ET
By Jeannine Aversa, AP Economics Writer
Federal Reserve Tries to Balance Need for Private Debate, Public Openness, Greenspan Says
WASHINGTON (AP) -- The Federal Reserve works hard to balance policy-makers' need to have private, unvarnished discussions about economic matters and investors' desire to keep abreast of the Fed's inner workings, chairman Alan Greenspan says.
"The Federal Reserve's current practices strike a reasonable balance between transparency and the degree of confidentiality appropriate" for policy-making, the Fed chief said in written responses to a series of questions posed by Rep. Jim Saxton, R-N.J., chairman of Congress' Joint Economic Committee.
The written responses, released Wednesday, were requested during a Nov. 3 committee hearing.
Greenspan, who retires on Jan. 31, has been credited with improving the Fed's openness and communications with Wall Street and Main Street in his 18-plus years at the helm. White House economist Ben Bernanke, chosen to succeed Greenspan, has said he plans to build on those efforts.
Clearer signals from the Fed about economic conditions and interest rates can help shape public perception and assist the Fed in attaining its goals -- namely keeping the economy and inflation on an even keel, Greenspan suggested.
Yet "excessive transparency could inhibit policy-makers, making them less spontaneous in their remarks and less willing to explore new ideas," Greenspan said. "Such an outcome would have adverse effects on policy decisions."
Greenspan and Bernanke have previously said that the notion of televising the Fed's closed-door meetings, where interest rate policy is set, would not be a good idea and would probably inhibit discussion. Greenspan didn't mention that possibility in his response Wednesday.
After years of operating in a mostly Sphinx-like mode, the Fed in 1994 began to state when it was changing the federal funds rate, a key rate used to influence economic activity. Eventually the Fed began to release statements after each of its eight regularly scheduled meetings a year and did so even when rates held steady.
Over time, the Fed began to give a reason for its actions and a brief assessment of economic conditions. Since early 2002, these statements also include how members voted.
In another written response, Greenspan said "it is impossible to know with any certainty" when interest rates have reached "neutral," the point where they are neither slowing nor stimulating overall economic activity.
The Fed has boosted interest rates 12 times since June 2004 to bring rates from extraordinarily low levels back to a more normal level now that the economy is on solid ground.
Before the Fed began to boost rates, they stood at a 46-year low of 1 percent. Currently they are at 4 percent, the highest in more than four years. Another rate increase is expected at the Fed's next meeting, Dec. 13.
"A full consideration of current and prospective economic developments, and of the risks to the outlook, is essential for the conduct of monetary policy," Greenspan wrote.
biz.yahoo.com/ap/051207/greenspan.html?.v=2