STOCK MARKET WATCH -- Thursday, 15 November 2012

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3. Fed Moves Toward Tying Interest-Rate Decisions to Economic Data

http://www.bloomberg.com/news/2012-11-15/fed-moves-toward-tying-interest-rate-decisions-to-economic-data.html


The Federal Reserve is embarking on the next step in Chairman Ben S. Bernanke’s journey toward greater transparency -- tying its outlook for borrowing costs to measures of employment and inflation.

The Federal Reserve is embarking on the next step in Chairman Ben S. Bernanke’s journey toward greater transparency -- tying its outlook for borrowing costs to measures of employment and inflation.

Policy makers “generally favored the use of economic variables” to provide guidance on the when they are likely to approve their first interest-rate increase since 2008, according to minutes of their Oct. 23-24 meeting released yesterday. Such measures might replace or supplement a calendar date, currently set at mid-2015.

A number of officials also said the Fed may need to expand its monthly purchases of bonds next year after the expiration of a program to extend the maturities of assets on its balance sheet, known as Operation Twist. The discussion indicates that Fed officials judge the economy still needs record stimulus to reduce an unemployment rate stuck near 8 percent.

“I just really don’t see how you’re going to get something that constitutes a substantial improvement in labor market conditions in the next month or so,” said Michael Hanson, senior U.S. economist at Bank of America Corp. in New York and a former Fed economist.