Fed can make progress on communication - Bernanke

WASHINGTON, Feb 14 (Reuters) Federal Reserve Chairman Ben Bernanke said today the US central bank was still debating how to improve its communication skills, and insisted that there was yet room for improvement.

''Over the past decade or so, the Federal Reserve has significantly improved its methods of communication, but further progress is possible,'' he told the Senate Banking Committee in his semi-annual testimony on monetary policy.

''Clear communication by the central bank about the economic outlook, the risks to that outlook, and its monetary policy strategy can help the public understand the rationale behind policy decisions,'' he said in prepared remarks.

Bernanke advocates adopting an inflation target to guide Fed policy, but some of his colleagues on the central bank's policy-setting committee fear this would restrict flexibility.

Bernanke has asked Fed vice chairman Donald Kohn, who has voiced scepticism over inflation targeting in the past, to head a panel to study communication-related issues.

At its policy meeting last month, the Fed was expected to have discussed the role economic projections and forecasts could play in communication.

''Our discussions are directed at examining all aspects of our communications and have been deliberate and thorough. These discussions are continuing, and no decisions have been reached,'' Bernanke told the Banking Committee.

''My colleagues and I remain firmly committed to an open and transparent monetary policy process that enhances our ability to achieve our dual objectives of stable prices and maximum sustainable employment,'' he said.

REUTERS KR RN2119