(Image source: Bloomberg)

BY JIM FLINK

ANCHOR MEGAN MURPHY

Revealing - the crystal ball. The Fed is giving everyone who cares to look -- more insight -- into the future of the funds rate. Publishing a regular prediction into what it thinks will happen with its key lending rates.

The New York Times reports, The FOMC is giving its quarterly prediction of short-term interest rates into 2014.

“It also will summarize when they expect to start raising short-term rates, which they have held near zero since late 2008. And it will describe their plans for the Fed’s investment portfolio.  The forecast could reduce borrowing costs for businesses and consumers by convincing investors that the Fed intends to keep rates near zero for longer than expected.” 

So -- why’s it a big deal? Fox Business’ Liz McDonald says -- it’s less of a guessing game for a key part of the economy.

“The Fed has never telegraphed before.  The Central Banks overseas do.  They only basically have meeting and discuss the minutes of the meetings, and you can divine where the fed funds rate is going to go.  Now, for the first time they’re going to telegraph. ... The question for the federal reserve is when will you hike rates?  How will you hike rates?  And what will that do for the markets and investors?”

Now, four times a year, we’ll have an answer. And The Washington Post’s Ezra Klein believes, this can mean only one thing -- stimulus -- for an otherwise fledgling economy.

“...the real impact of the new projections could be on the consumers and businesses who will now have a better idea of how long they have to take advantage of low interest rates, for example, providing greater certainty and perhaps a stimulus of sorts to the economy.”

But, former Fed Dallas Chair Bob McTeer has always argued for less transparency. Writing for Forbes, he says, revealing too many secrets, makes the larger economy too reliant on the Fed’s actions.

“The economy is looking better—much better. While a “tight” monetary policy probably won’t be in order for some time, to me that doesn’t necessarily imply near-zero federal funds rates. The “financial repression,” meaning the loss of a return on saving and savings, may not be a serious matter during a normal period of easy money during a normal recession. After a few years, however, it must be taken more seriously.”

An analyst on Bloomberg agrees -- somewhat. While calling transparency -- on the whole, a good thing -- Barclay’s Julian Callow says, it also creates a dependency issue by the banks.

"This could have quite a significant impact, because the whole of the financial markets are going to get very much anchored on what the fed is saying ... It might actually be too much, so it’s going to take some time for the system to bed down...”

Not everyone is convinced the markets will move heaven and earth at the Fed’s announcements, though. The blog Mindful Money notes, the Fed often misses the mark on other predictions, so this one won’t be seen as reliable by those in the know.

“This move to my mind illustrates what has happened to central bankers, they have become addicted to announcements and cannot stop even when they have little or nothing to announce. Step by step they have become more like politicians and it is my opinion that this trend needs to be reversed.”

The more transparent Fed unveils -- January 25th.