Meeting participants discussed several possibilities for enhancing the clarity and transparency of the Committee’s economic projections and their role in policy decisions and policy communications. In particular, participants noted that while the Summary of Economic Projections (SEP) provides information about their individual projections of key macroeconomic variables and about the path of monetary policy that each sees as appropriate and consistent with his or her projections, the SEP does not provide guidance about how those diverse views come together in the Committee’s collective judgment about the outlook and appropriate policy as expressed in its postmeeting statement. Many participants indicated that if it were possible to construct a quantitative economic projection and associated path of appropriate policy that reflected the collective judgment of the Committee, such a projection could potentially be helpful in clarifying how the outlook and policy decisions are related. Participants discussed examples of the economic and policy projections published by a number of foreign central banks. Participants generally indicated a willingness to explore adjustments to the SEP, while highlighting the importance of communicating not only the Committee’s collective judgment but also the diversity of their views regarding the economic outlook and monetary policy. Many participants noted that developing a quantitative forecast that reflects the Committee’s collective judgment could be challenging, given the range of their views about the economy’s structure and dynamics. Several participants judged that the incremental gains in transparency that would result from developing and presenting such a consensus projection would be modest, given the breadth of information already provided in the Committee’s policy statements, the minutes of Federal Open Market Committee (FOMC) meetings, and the Chairman’s press briefings. Participants agreed to continue to explore ways to increase clarity and transparency in the Committee’s policy communications; many noted that the Committee had introduced a number of changes in its communications over the past year or so, and emphasized that further changes should be considered carefully. At the end of the discussion, the Chairman asked the subcommittee on communications to explore the feasibility and workability of potential approaches to developing an FOMC consensus forecast.
Developments in Financial Markets and the Federal Reserve’s Balance Sheet
The Manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign financial markets during the period since the FOMC met on April 24-25, 2012. He also reported on System open market operations, including the ongoing reinvestment into agency-guaranteed mortgage-backed securities (MBS) of principal payments received on SOMA holdings of agency debt and agency-guaranteed MBS as well as the operations related to the maturity extension program authorized at the September 20–21, 2011, FOMC meeting. By unanimous vote, the Committee ratified the Desk’s domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System’s account over the intermeeting period.
By unanimous vote, the Authorization for Domestic Open Market Operations was amended to include the authority to conduct small-value operations for the purposes of routine testing of operational readiness. In addition, the Authorization was amended to include the authority to conduct intraday repurchase agreement (repo) transactions with foreign and international accounts to prevent daylight overdrafts in those accounts.4
