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Monday, September 17, 2007

Fed Transparency

Here's an idea for additional transparency into Fed thinking. Suppose we require that each of the twelve members of the Federal Open Market Committee (the committee that sets the federal funds rate) post their stance on monetary policy once per day on a central web site.

On the Fed's main web site there would be a page listing each Committee member's answer to the question "If I had to set the federal funds rate today, I would set it at ____" and a table would list all twelve answers along with the last time the answer was updated, Committee members would be required to update their answer at least once per day, even if there is no change, and they could update it more often if desired, e.g. in response to news about the economy (the basic unit of time could be weekly as well). It would probably be best if the votes were anonymous, but that isn't essential.

I haven't thought this through, just one of those things that pops into your head, but it does seem to take away some of the uncertainty about the course of policy. What are the problems with this? Would this be viable? It wouldn't resolve all uncertainty about the outcome of FOMC meetings, but most of the time market participants would have a pretty good idea what to expect.

    Posted by on Monday, September 17, 2007 at 07:38 PM in Economics, Monetary Policy | Permalink  TrackBack (0)  Comments (11)

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