The Fed Should Strengthen Safeguard of Economic Data Said the Watchdog
Apr 21, 2016 04:23 AM EDT
The Fed's Office of Inspector General stated in its audit report that the U.S. central bank should improve its safeguard of economic data. Particularly the safeguard of the information it provides to news outlet.
Federal Reserve is adviced to increase security on sensitive economic information to the media. As the inspector general said in a report on Wednesday regarding multiple weaknesses in the policies and procedures to protect sensitive data, especially information the central bank provides to news outlet.
Audit of the Federal Reserve is conducted by the Office of Inspector General, which focuses on its information safeguard policy. The Inspector General released its 38-page report on Wednesday. In the report which was dated April 15, Reuters reported the note from auditors stated, "substantial improvements were planned before we began our review and that many were implemented during our review."
The watchdog also warned the that some news organization have the potential of profiting from early access to Fed data. The news organization can make profit from the data by providing high-speed data feeds to allow automated traders to act on market-moving information instantly.
"The Fed board should consider how news organizations are using their access to embargoed information and whether such activities advance the board's stated purpose," the report further said.
According to Wall Street Journal, the Fed and other government agencies release embargoed economic information early to news organizations, including News Corp.'s Dow Jones & Co., publisher of The Wall Street Journal and Dow Jones Newswires. The news released early is through a process, known as press lockup, which according to Inspector General have potential of profiting.
However, the agencies argue that lockups give reporters time to digest complex data and prepare written reports for broad dissemination to the public. Some news outlets also compete in sending government economic numbers to traders as soon as they are released.
CNBC reported the embargo on the Fed's most market-sensitive information are ranging from the Federal Open Market Committee's statement on monetary policy and policy meeting minutes to monthly data on industrial production and consumer credit. In order to access information, journalists must surrender cell phones and other electronics, and pass through a metal detector before entry to the secured room in the Fed premises.
In that room, journalists are allowed to write news stories for publication when the embargo is lifted and the Fed restores communications to the outside world. Nevertheless, the auditor suggested further measures to improve safeguard the Fed's information. That includes improving the verification process for reporters, informing journalists more clear information when documents provided under embargo can be released to the public, and making a more consistent rules on embargoed content.
Those measures as Inspector General suggested will improve the Fed's safeguard of sensitive economic data. Primarily for the embargoed information it provides to news outlet.