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The Week Ahead: Fed more open, but no less unpredictable

By Tom Hudson, McClatchy Newspapers –

When does a possibility become a promise? For three years the Federal Reserve has said it expects the economy to remain so weak it will likely keep interest rates at “exceptionally low levels … for an extended period.”

Since first setting out that anticipation, 1.1 million jobs have been created, the unemployment rate has fallen from almost 10 percent to just above 8 percent, and inflation has been low. These are enviable trends that have helped pull the U.S. economy out of the tailspin it was in three years ago.

To some observers, the Federal Reserve is too shrouded in mystery, hidden behind its imposing marble building in Washington, D.C. There have been calls for more congressional oversight, audits and accountability. In the past two years, the institution has begun providing more data and accessibility. Chairman Ben Bernanke now holds regular news conferences. The decision-makers even began publishing their own predictions for the first time since the agency was created in 1913. But more information doesn’t always lead to more insight.

What is unique for our Federal Reserve, compared to other central banks, is it is required by law to “promote effectively the goals of maximum employment (and) stable prices.” In other words, get as many Americans to work as possible without igniting out-of-control inflation.

So when a Federal Reserve committee meets Tuesday to decide interest rates, we know what its goals are. We know what its expectations are. But with low interest rates helping unemployment and rising energy prices fueling future inflation, neither of those possibilities are promises.

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