Almost two years into his tenure as chairman of the Federal Reserve, Ben S. Bernanke is still figuring out how to talk to Wall Street. Offhand comments about interest rates -- to Congress, to the media, to CNBC anchor Maria Bartiromo at a White House correspondents' dinner -- nudge the markets up or down. Each time he opens his mouth, it seems, someone compares him to his oracle-like predecessor, Alan Greenspan, often unfavorably.
But if a new Fed forecasting regime is any indication, he may finally be finding his voice. Bernanke has frequently argued that the central bank must be more transparent in the way it governs monetary policy. The idea is that Wall Street and policymakers, so apt to panic after every perceived twitch or sniffle from a Fed chief, might react more rationally if they understood the thinking behind Fed actions.
So, starting today, Federal Reserve forecasts will come out twice as frequently -- four times a year. They'll also provide more information, looking ahead three years instead of two, which should help smooth out the effects of short-term economic wobbles on the numbers. Rather than focusing primarily on "core inflation," the new forecasts will project "headline inflation," which takes into account energy and food prices, two expenses that make big dents in household pocketbooks. And they'll also provide a "narrative" intended to explain why different Fed officials might have varying takes on what the numbers mean.
Any time a government body known for secrecy announces plans to be more forthcoming, we are heartened. A few critics have fretted that by publicizing its forecasting -- a necessarily inexact science -- the Federal Reserve will undermine its credibility. But obfuscation undermines credibility too. This may be why many central banks have already expanded reporting.
Some also make known their targets for inflation -- another move that Bernanke, and this page, has supported because it helps rein in public expectations of price increases. Bernanke's innovations don't go that far -- but happily, they might not need to. Some economists have suggested that the changes to the forecasts amount to "inflation targeting lite," providing the clarity the economy needs to keep an even keel.
Would that the Fed chair could also control the way Wall Street chooses to interpret the new information. Bernanke has been careful to emphasize that the new forecasts are a work in progress. No doubt entire Manhattan ZIP Codes are full of people pulling out their hair, wondering what that could possibly mean.