DP13915 Improving U.S. Monetary Policy Communications

Author(s): Stephen G Cecchetti, Kermit Schoenholtz
Publication Date: August 2019
Keyword(s): central bank accountability, central bank communication, Federal Reserve, forward guidance, monetary policy, Monetary policy credibility, Policy Transparency, Reaction functions
JEL(s): E50, E58, E61
Programme Areas: International Macroeconomics and Finance, Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13915

The Federal Open Market Committee (FOMC) publishes vast amounts of information regarding monetary policy, including its goals, strategy and outlook. By reinforcing the commitment to price stability and maximum sustainable employment, this transparency has helped improve U.S. economic performance in recent decades. Based on two dozen interviews with policy experts, we identify three objectives that guide our search for further improvements in communications practices: simplifying public statements, clarifying how policy will react to changing conditions, and highlighting uncertainty and risks. As examples, we propose a simpler post-meeting policy statement and the introduction of a concise Report on Economic Projections, the elements of which are mostly available in existing publications. A broader, systematic application of these objectives could also help the FOMC streamline other aspects of its communications framework.