July 11, 2005

Fed publishes code for deciphering minutes

WASHINGTON (Reuters) - Attention Fed watchers. Bored by the
increasing transparency of the U.S. central bank? Longing for
the good-old days when the Federal Reserve's policy stance
could only be discerned through careful monitoring of money
market conditions? Well don't read this.

In a move that will no doubt make your life even more
joyless, the Fed has issued tips on how to parse the minutes of
the closed-door meetings of the Fed's policy-setting Federal
Open Market Committee -- further lifting the veil of secrecy
that had cloaked the secretive panel for years.

In an article in the latest Federal Reserve Bulletin that
provides an overview on the history of FOMC minutes and how
they are prepared, two Fed staffers offer guidance on how to
gauge the depth of support for various policy-maker views
expressed in the minutes.

"To give an indication of how widely expressed a particular
view is at a meeting, the minutes use common quantitative
wording: 'all,' 'most,' 'several,' 'few,' or 'one,' in
descending order," they wrote.

They caution, however, that tracking expressions of support
during the give-and-take of the panel's discussion is "an
imprecise science," noting by way of example that some
policy-makers may decide there is no need to cover territory
already trod by earlier speakers.

The short article, available on the central bank's Web site
at www.federalreserve.gov/pubs/bulletin/2005/spring05_fomc.pdf,
also notes that the minutes distinguish between "meeting
participants" and "members," which the Fed deems to be the
smaller subset of officials who actually vote at the meeting.

While all members of the Washington-based board and the
heads of the 12 regional Fed banks participate in each meeting,
only five of the regional bank presidents have a vote during
any given year.

The article discusses the Fed's recent decision to
accelerate the release of the minutes -- now published three
weeks after each meeting rather than after the subsequent
gathering -- and notes the Fed had to employ more resources to
meet the stepped-up pace.

"The committee believed that the costs and risks associated
with the new schedule were outweighed by the benefits of
additional policy transparency and openness," the authors said.

Good to know at least one government agency is giving
careful consideration to the financial cost of its decisions.