This part of the statement is identical to the one offered after the January 31 meeting. But the entire statement was not identical. On January 31, the Fed offered an assessment about the economy and inflation:

The new statement did not really change the tenor of the assessment, but offered more description. The expansion of economic information reflects Bernanke's style. But it does not offer any new information that we haven't heard from Fed officials, including Bernanke himself in the past month.

Today's news, though expected, appeared to roil the bond and equity markets, although it gave a boost to the dollar. Lately, market players have been behaving like children who know their parents won't buy them the latest video game but throw a tantrum anyway when their parents come back empty handed. Basically, bond and equity investors keep hoping that the Fed will stop raising rates, but their hopes are dashed. Still, most economists and many market players expect the Fed to raise the fed funds rate target to 5 percent. While an explicit inflation target does not yet exist, many Fed officials have indicated a target for core inflation between 1 and 2 percent. Look at the core inflation rate in the chart below - it is at the upper end of that target range. Given that Fed officials are currently worried about tight labor markets, it should not be a surprise that they are leaving the door open to continue their rate hikes.

NO TV CAMERAS AT FOMC MEETINGS
When Fed Chairman Ben Bernanke testified before Congress about a month ago, he specifically said that he would not welcome TV cameras to tape FOMC meetings in progress even though he did believe that great transparency (that is, greater clarity) is good for the markets and the economy. Since then, I have heard more than one Fed official talk about the concept of transparency and disclosure, and all have agreed that televising FOMC meetings would inhibit the discussion flow. Market players don't expect televised FOMC meetings (at least I don't think so). In fact, too much information could even be bad for trading. A little bit of mystery leads to greater speculation and therefore generates some volatility. Without volatility, wouldn't markets be dull?

In any case, various Fed experts have brought forth some ideas that the Bernanke Fed could undertake in coming months. For instance, the Fed currently releases its forecast twice a year: in February and July. The monetary policy report reveals the central tendency of Fed governors and district bank presidents for nominal and real GDP growth, the core inflation rate measured by the PCE deflator (excluding food and energy), and the unemployment rate. Some Fed analysts have suggested that the Fed might want to release these forecasts, or expectations, more frequently. Even if they released them quarterly, it would double the current information flow! Perhaps the Fed could release monthly forecasts. It is no secret that economic forecasters tweak their forecasts every month. Sometimes changes are minor, sometimes they are not. But every new set of monthly economic indicators does reveal more information that can be used in forecasting. It is likely the Board of Governors' staff would also make monthly adjustments to their forecasts as new information comes in.

The Fed's monetary policy outlook text is produced twice a year. Other central banks provide more frequent reports. Some are monthly, and others are quarterly. The Financial Times reported Monday on a study published in the latest volume of the European Journal of Political Economy, which stated that the Reserve Bank of New Zealand, the Swedish Riksbank and the Bank of England were the most transparent central banks. The Bank of Canada and the European Central Bank (ECB) were next in line, finally followed by the U.S. Federal Reserve. Three banks were less transparent than the Fed: the Reserve Bank of Australia, the Bank of Japan, and the Swiss National Bank. According to the study, the Federal Reserve's objectives lacked clarity. Economics 101 tells us that the Fed has a dual mandate to promote full employment and price stability. However, neither of these are ever defined. Economists do not agree on a specific number for full employment, perhaps because it changes over time. Price stability in theory should mean no inflation. But Fed officials have long believed that a low rate of inflation is useful in greasing the wheels, so to speak, of monetary policy tools. Without explicit goals, Fed watching becomes more of a sport than if goals are more clearly outlined.

The Financial Times article does suggest that some banks have become more transparent because in the past, they lacked the credibility of the Federal Reserve. The Bank of England is cited as an example here. The sterling was ejected from the European Exchange Rate Mechanism in 1992 and the credibility of British policymaking was wrecked. As a result, they began to issue quarterly inflation reports. The president of the ECB conducts a news conference once a month. But, the ECB does not issue minutes of its meetings or voting records of its members. Stephen Checchetti, professor of economics at Brandeis University (and former head of research for the New York Federal Reserve Bank), was quoted by the Financial Times: "Communication is culturally and politically specific. Ben is not going to start giving a monthly news conference."

Dr. Ben Bernanke, the Princeton professor, studied central banks around the globe. It is likely that the professor will continue to analyze how other central banks operate and the tools they use to clarify their goals and policies. He now has the luxury of putting his studies into practice. But Dr. Bernanke, the Federal Reserve Chairman, will probably be pragmatic and take his time.

THE BOTTOM LINE
Fed officials voted unanimously to raise the fed funds rate target by 25 basis points to 4.75 percent. The post meeting statement was fleshed out and more descriptive than the one issued after the January 31 meeting, but the bottom line was not changed: more firming may be needed.

To some degree, bond and equity investors acted like spoiled children because there was absolutely nothing new or unexpected in the statement. They were simply disappointed that the Fed didn't announce an "end date" to their rate hikes. But the statement is an open door. It does allow the Fed to raise rates if necessary, but it also shows that the Fed is looking closely at economic data that could show a slowing or accelerating rate of inflation. If inflation news improves, the Fed might find that they will soon be done with their rate hikes. This was true before - and after - the FOMC meeting.