“The Federal Reserve signaled it’s moving toward linking its outlook for near-zero interest rates to specific economic conditions such as a decline in the unemployment rate.
The move would represent a shift from the Fed’s policy of tying low rates to the calendar. At its last meeting, the Federal Open Market Committee extended its time horizon at least through the middle of 2015 from late 2014, a decision that some policy makers said could be misinterpreted as a downgrade of their economic outlook, according to minutes of the Sept. 12-13 gathering.
“The benefit of some numerical guidelines or thresholds would be that people would really understand their intention of keeping rates low,” said James Hamilton, a professor of economics at the University of California at San Diego whose research on the effectiveness of alternative policy tools has been cited in Fed Chairman Ben S. Bernanke’s speeches.”
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