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Tuesday, February 28, 2006

The Fed's Communication Strategy

St. Louis Federal Reserve president William Poole doesn't think the typical consumer of Fed speak has enough training in economics and monetary policy to understand unfiltered policy deliberations properly, so the statements need to be cleaned of potentially misleading technical language. I'm not sure I agree on this point. Here's a brief part of a much longer speech on Fed communication:

Fed Communications, by William Poole, St. louis fed President, Feb. 24, 2006: ...Fed communications issues are often discussed under the general term “transparency.” What, literally, does transparency mean? ... Transparency must mean disclosing as much as possible without damaging the integrity of policy deliberations. That integrity is essential both to be sure that all issues are fully debated and to ensure that information ... remains confidential. But there is [an] aspect to transparency that is incompletely understood. ... Much of the FOMC deliberation consists of fairly technical discussions. Without an advanced degree in economics, or extensive policy experience, much of this material is simply incomprehensible. Thus, although policy experts can understand undigested material, the message that they would convey to the general public would likely not be timely and might not closely match, in emphasis and tone, the consensus message the FOMC would want to convey. ...Instead, the Fed needs a conscious communications strategy rather than a strategy of simply “opening up.” The purpose of a conscious strategy is not to hide anything but rather to have a clear transmission of information. ... FOMC transcripts ... require a substantial background in economics and the history of monetary policy to interpret correctly. ...

What about members of the FOMC who do not have this background (see "Kevin Who?")? Should we be worried they might misinterpret technical material presented at meetings?

    Posted by on Tuesday, February 28, 2006 at 12:09 AM in Economics, Fed Speeches, Monetary Policy | Permalink  TrackBack (0)  Comments (3)

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