WEST CHESTER, PA. (TheStreet) -- Change is likely coming to the Federal Reserve. The questions are: When and what will the effects be?
Proposals to change the Federal Reserve's communication strategy and structure are coming from Congress and from inside the Fed. The Fed should be proactive and adopt some subtle, though not substantive, changes to get itself off the hot seat. If it doesn't do it on its own, lawmakers may affect changes that could do more harm than good. (Read more: Strong jobs report should give Fed reasons to keep rates low.)
Retiring Dallas Fed President Richard Fisher has proposed the New York Fed's power should be reduced and the other regional banks should have more influence on the FOMC. This is getting lawmakers' attention. There is a logical reason for the New York Fed president's permanent voting seat as this regional bank carries out open market operations. (Read more: What does the market expect of the Fed?)
Still, Fisher wants a more democratic approach. Currently, the Fed Chair and her inner-circle, the Federal Reserve Board, have the greatest influence. The regional Fed presidents are often the most vocal but the governors rarely break rank.
This change would likely be modest as a majority of regional presidents would have to be on the same page to influence the course of monetary policy, and this rarely occurs. While the Fed's odds of adopting the Fisher proposal are low, doing so could be the lesser of two evils.
The plan could win points with lawmakers and table other, more significant, changes. Lawmakers have proposed auditing the Fed's monetary policy decisions, dropping its full-employment mandate, adopting a mathematical rule for determining interest rates, seating a community banker permanently on the Board of Governors and barring regional Fed presidents from voting on the FOMC. These are changes that would do more harm than good. (Read more: Analysis of U.S. monetary policy.)
The Fed's post-meeting statement isn't safe from criticism. Cleveland Fed President Loretta Mester took issue with the current outline of the FOMC post-meeting statement and proposed reorganizing it in a speech Monday. The Fed has made significant changes to its policy statement in the past, and it's unclear how much support this has. There are enough communication changes coming, likely next week, and the central bankers don't need to shuffle the statement around now.
The employment data make it very likely that the Fed will remove "patient" from its post-meeting statement next week, and long-term rates could move higher. Dropping patient could be interpreted as indicating the Fed will raise rates in June. This interpretation is misguided.
The word change could still cause markets to reassess their expectations for short-term rates, driving long-term rates higher. Also, the March meeting will include a new Summary of Economic Projections, and interest rates have shown a tendency to rise ahead of these meetings.
Read Ryan on Moody's Analytics Dismal Scientist.