Federal Reserve officials will for the first time make public their own forecasts for the federal funds rate at their Jan. 24-25 meeting, minutes from the December 13 Federal Open Market Committee said today.
FOMC “participants decided to incorporate information about their projections of appropriate monetary policy” into their Summary of Economic Projections starting with their next meeting, the minutes said.
The move marks another stride toward greater transparency under the chairmanship of Ben S. Bernanke. By releasing their forecasts, central bankers are likely to alter expectations for the timing of the first increase in their benchmark rate, which has been kept near zero since December 2008. Last month, Fed officials repeated their view that economic conditions would warrant “exceptionally low levels for the federal funds rate at least through mid-2013.”
“A number of members indicated that current and prospective economic conditions could well warrant additional policy accommodation,” the minutes said. Those members also decided that “any additional actions would be more effective if accompanied by enhanced communication” about the FOMC’s longer- run economic goals and policy framework.
Fed officials will show investors their forecast for the federal funds rate in the fourth quarter of the current year and the next few calendar years, and over the longer run, the minutes said. The summary of forecasts “also will report participants’ current projections of the likely timing of the first increase in the target rate given their projections of future economic conditions.”
‘Expanding Moderately’
The FOMC said after its Dec. 13 meeting that the economy “has been expanding moderately,” compared with the Nov. 2 assessment that growth “strengthened somewhat.” The central bank also added a reference to “apparent slowing in global growth,” and said that “strains in global financial markets continue to pose significant downside risks to the economic outlook.”
Recent data on manufacturing, housing and jobs indicate the expansion is accelerating.
Factories expanded in December at the fastest pace in six months, according to a report today from the Tempe, Arizona- based Institute for Supply Management. Fewer Americans filed applications for unemployment benefits over the past month than at any time in the past three years, Labor Department figures showed last week.
Builders broke ground in November on more houses than at any time in the past 19 months, the Commerce Department said Dec. 20. The Standard & Poor’s Supercomposite Homebuilding Index, which includes Toll Brothers Inc. and Lennar Corp., climbed 34 percent in the fourth quarter, while the broader S&P 500 increased 11 percent.
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Gold Rallies Most in 10 Weeks on Iran, Dollar
Gold futures headed for the biggest gain in 10 weeks on increased demand from investors after reports that Iran produced its first nuclear fuel rod and as the dollar weakened. Silver also gained.
A domestically-made rod was inserted into the core of Tehran’s atomic research reactor after performance tests, the Iranian Students News Agency reported yesterday. The dollar fell against the euro on signs that manufacturing is expanding in the U.S. and China. Blackstone Group LP’s Byron Wien, who had correctly predicted last year’s gain in gold, said bullion will rally 15 percent in 2012 to $1,800 an ounce.
“Fear trade is back because of Iran,” Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Also, we are seeing buying across commodities because of the weaker dollar.”
Gold futures for February delivery climbed 2.3 percent to $1,603.40 an ounce at 12:40 p.m. on the Comex in New York, heading for the biggest gain since Oct. 25. While prices rallied 10 percent last year, the 11th straight annual advance, the metal slumped 10 percent in December and touched $1,523.90 on Dec. 29, the lowest since July 7.
“Accommodative monetary policies throughout the developed world cause a renewed migration to hard assets by individual investors and sovereign-wealth funds,” Wien wrote in a report today.
Hedge funds and other money managers cut bets on higher prices for gold futures by 4.5 percent to 111,919 contracts in the week ended Dec. 27, the lowest level since January 2009, U.S. Commodity Futures Trading Commission data show.
“Improved physical interest is likely to provide good support,” James Moore, an analyst at TheBullionDesk.com in London, wrote today in a report. The drop in speculators’ positions on the Comex is “suggesting plenty of upside price potential once sentiment improves,” he said.
Silver futures for March delivery jumped 5.8 percent to $29.53 an ounce on the Comex, heading for the biggest gain since Nov. 22. Silver will rise to $40, Wien said
