Fed considers new trigger rules on rates The US Federal Reserve considered a new form of guidance about future interest rates at its September meeting but decided that more work was needed first. The new guidance would replace its forecast of low interest rates until mid-2015 with an economic trigger - such as a lower level of unemployment - that would prompt a rise in rates. That suggests the Fed wants to find further ways to boost the recovery and points to its next direction after September's launch of the $40bn a month, QE3 programme to buy mortgage-backed securities. According to the minutes, "many" participants at the rate-setting Federal Open Market Committee favoured replacing the calendar date guidance, arguing that it would make the Fed's future actions more predictable and bolster the stimulus provided by QE3. "Many participants thought that more effective forward guidance could be provided by specifying numerical thresholds for labour market and inflation indicators that would be consistent with maintaining the federal funds rate at exceptionally low levels," say the minutes. That is similar to the "trigger" or "threshold" strategy proposed by Chicago Fed president Charles Evans and taken up by Narayana Kocherlakota of the Minneapolis Fed. Under the proposal from Mr Evans, the Fed would plan to keep interest rates close to zero as long as unemployment was above 7 per cent and inflation was below 3 per cent. The current unemployment rate is 8.1 per cent. The core inflation rate was 1.9 per cent in August, down from 2.1 per cent in July. However, the minutes say that "reaching agreement on specific thresholds could be challenging," because Fed officials have widely differing views. The FOMC agreed to do further work on how to communicate such a threshold and make sure it was not seen as an automatic trigger for a rise in interest rates. The minutes show that there was broad support for QE3 with "many" participants backing the programme and only a "few" expressing skepticism about its effects. The FOMC also conducted another exercise in trying to reach a consensus economic forecast for the whole committee that would replace the current individual forecasts by each of the nineteen participants. The minutes say there will be a "broad discussion" on a consensus forecast at October's FOMC meeting, suggesting that a decision to start producing one may be near. A consensus forecast could make it much easier to describe an unemployment or inflation threshold at which to raise interest rates because there would be a single number to use as a reference point.