Fed spells out how it will forecast rate changes

January 20, 2012 - 4:35 PM

WASHINGTON (AP) — The Federal Reserve has specified how it will begin signaling when its benchmark interest rate will rise and what the rate will be at points in the future.

Four times a year starting Wednesday, the Fed will show in a chart the year when Fed officials predict they will begin raising the rate. Another chart will show individual Fed members' predictions for the rate at the end of 2012, 2013 and 2014.

More guidance on rates might help lower long-term yields further — in effect providing a kind of stimulus. Lower rates could lead consumers and businesses to borrow and spend more. The economy would likely benefit.

The Fed has left its key short-term rate at a record low near zero for the past three years. In August, it said it planned to leave the rate there until at least mid-2013, unless the economy improved.

Many private economists believe the rate is likely to remain near zero for longer than the mid-2013 target. Many are forecasting the first rate hike will not occur until sometime in 2014.