“The change in communications policy is part of a broader effort by the Fed’s chairman, Ben S. Bernanke, to improve public understanding of the central bank’s goals and methodology. It formalizes a series of experiments with forecasting that the Fed has made in recent years, beginning with its statement in December 2008 that rates would remain near zero ‘for some time.’
Talking about future policy was a longstanding taboo among central bankers, who worried that investors would treat the predictions as promises and react badly when some predictions inevitably were off base. But the Fed now is casting its lot with the growing camp that regards shaping expectations as a primary tool for monetary policy, and is eager to seize any opportunity.” (New York Times)
“Shaping expectations” and “improving public understanding” both sound better than “image-management,” especially when central planning’s the real story.
FEE Timely Classic
“The New Fed” by Sheldon Richman
“Money and Inflation: What’s Going On in the World?” by Gerald P. O’Driscoll, Jr.