U.S. Federal Reserve officials will begin to publish quarterly forecasts for interest rates later this month, part of a communications revamp that could help bolster the fragile U.S. economic recovery.

    Fed officials will tell the public when they expect short-term interest rates to rise from near zero given their projections for economic growth, unemployment and inflation, minutes of the Fed’s Dec. 13 policy meeting showed yesterday.

    They will start to make the rate forecasts public after the next meeting of the Fed’s decision-making body Jan. 24-25.

    Together with their economic projections, Fed officials will publish forecasts for what they consider the appropriate level of the federal-funds rate — the U.S. central bank’s benchmark rate — in the final quarter of 2012 and at the end of the next few years.

    “An accompanying narrative will describe the key factors underlying those assessments as well as qualitative information regarding participants’ expectations for the” Federal Reserve balance sheet, the minutes of the meeting revealed.

    U.S. central bank officials have been growing increasingly uncomfortable with a statement they made in August, when they said that short-term interest rates were likely to stay close to zero at least until mid-2013.

    Several officials believe that, with inflation coming down in 2012 and unemployment expected to stay too high until the end of 2013, rates are likely to stay at a record low beyond mid-2013.

    While several Fed officials expressed dissatisfaction with the way the central bank was communicating its plans, they were divided on how to improve it, the minutes showed.

    One official suggested the projections would be more understandable if they were based on a common interest rate path, while another suggested it would be preferable to publish a consensus policy projection of the entire Fed committee.

    Some participants expressed concern that publishing information about participants’ individual policy projections could confuse the public.

    In the end, however, most officials participating in the Dec. 13 Federal Open Market Committee meeting agreed that adding their projections of the target federal-funds rate — or the rate at which banks lend to each other overnight that is largely controlled by the Fed — “would help the public better understand the Committee’s monetary policy decisions and the ways in which those decisions depend on members’ assessments of economic and financial conditions.”

    Apart from boosting transparency at the central bank, the move could also benefit the U.S. economy.

    By telling the public that rates are likely to stay at a record low for longer than people expect, the Fed might be able to stimulate economic growth and employment.

    (SD-Agencies)