Fed Economists’ Stakes in Forecasting Firm Spur an Internal Probe

The Federal Reserve’s internal watchdog is probing a group of Fed economists who also own shares in a U.K. economic-forecasting company, a person familiar with the matter said.

At issue is whether the economists’ ownership stakes in the private firm could have created a conflict of interest.

The inquiry, by the Fed’s Office of Inspector General, centers on four economists who also have owned shares in London-based Now-Casting Economics Ltd., the person said. The inquiry is at a preliminary stage, this person said.

Like the Fed, the U.K. company makes short-term economic forecasts using real-time data. It sells that information to investment firms, such as hedge funds, which use it to help make market bets. Having a vested interest in the U.K. company puts the Fed economists in a position where they could be suspected of a conflict or the appearance that the U.K. company is selling access to such information.

The Fed’s code of conduct says employees “should avoid any situation that might give rise to an actual conflict of interest or even the appearance of a conflict of interest.” The Fed has policies in place that govern information security.

The OIG was notified of the matter by a U.S. economic forecasting and financial-technology company, Economic Alchemy LLC, which is a defendant in a trademark dispute with the Fed and Now-Casting Economics, legal filings with the U.S. Patent and Trademark Office show.

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